GST: Inspection, Search, and Seizure

Inspection in GST

When does the inspection in GST commence?

Inspection in GST commences when a joint commissioner gets some reasons to believe that you are evading the tax. And the inspection is immediately carried out if any person registered under GST indulges in any following activity.
Suppression of any transaction of supply
Hiding stocks in hand
If any individual claims an excess input tax credit
Violation of any sort of provision under the GST Act
In cases where any transporter, business owner, or warehouse operator keeps goods with no tax payment receipt/ have kept goods suppressed to avoid tax payment.

So, in such cases, the joint commissioner/ any other higher rank officer can order any GST officer to commence inspection in the business places in the form GST-INS-01. The individuals who will go through the inspection process are:
All taxable persons
Business owners/warehouse operators
Further, the authorized officer can also inspect any other business places if he/she finds it to be suspect-able.

What does the term "reason to believe" refer to?

The term Reason to believe in GST refers to knowing facts. That implies considering the facts that can make any person reasonable for inspection. Sometimes it may not mean having a piece of direct knowledge.

Further, based on the Indian Penal Code, 1860, any individual is said to have reason to believe a fact if he/she has enough cause to believe that he/she is involved in any such fact.

But in GST, Reasons to Believe is a point of determination, where the senior officers get enough reason to determine that a taxable person should be inspected or not.
Is it essential to record the reason to believe in writing before passing the order of inspection?

As per the GST Act, there is no such rule that the reason to believe must be recorded and provided in writing to the inspecting offer. The finance Act of 2017 was already amended in Sec 132(1), and (1A) that no reason to believe shall be disclosed to any of the officers.

Search in GST

Before moving on to search in GST, you must be having a doubt. And that is what the difference between search and inspection is? As per the GST regime:
Search is an attempt to discover something. In legal language, it is one of those government departments❜ actions where a concerned officer goes to examine a person, place/ thing carefully. A search is conducted to find some evidence of accusations. And further, a search can only take place under proper authority and law.
Inspection, on the other hand, is the act of examining a place/person based on the evidence. In legal language, inspection is a provision that offers access to any place of business/person. You can search for anything and everything that you doubt. So, in GST, inspection is done to access the place of business of any taxable person, transporter/ warehouse operators.

Who can pass the order to search in GST, and when?

Based on the inspection result/ any other circumstances, the joint commissioner of CGST/SGST can pass an order to search if he/she has reasons to believe. The officer then searches to find out:
Any goods that are responsible for Seizure
Any book, document/paper that canbe helpful in the proceedings and is suppressed somewhere

Seizure in GST

What do you mean by Seizure?

The word Seizure is not certainly mentioned in GST. But in legal language, Seizure is a word that defines the activity of taking over something/someone by the authority by following a legal process. If any seizure of evidence is found at a crime scene, it is forcibly possessed by authorities against the owners❜ will.
The basic difference between Seizure and detention
Detention in legal language means accessing the seized goods based on legal notice. However, in this case, the goods owner will still have ownership of the seized goods.
Seizure in legal language is taking over the actual possession of the good by the authorized department. In this case, also, ownership remains with the owner. But Seizure, in any case, can only be made after commencing an investigation.

The procedure of Seizure in GST

If the authorized officer finds any reason to believe after the investigation, he/she can pass an order of Seizure in the Form GST-INS-02.

What powers do the officers possess who are authorized to search?

The officers who are authorized to search possess the power to seal the door of business premises. He/she can open the door forcefully by breaking it. Further, he/she can also break open the cupboards and shelf in the business place to find out goods/documents that can be seized.

What will happen if seizing good is not possible?

If seizing the good is not possible, then the authorized officer would order the business owner not to move the goods without the permission of a concerned officer. And he/she shall pass this order in the form GST-INS-03.

How long would be books/documents kept by the officer?

If the officer takes any book/ document of the business owner, they can keep it as long as it is necessary for an inquiry. And the book/document that irrelevant to the case would be returned within 30 days from the notice date.
Further, the seized goods can be released by the business owner. But this must be done against a bond. A bond would make on the value of the good in the form GST-INS-04. However, the owner will also have to provide security in the form of a bank guarantee.

What are the procedures after Seizure?

1. The individual can only produce a copy of seized documents in the presence of any officer.
2. If no notice is issued within six months, the seized goods shall be returned.
3. The government can make a list of hazardous/perishable goods among the seized goods. So, they would be disposed of.
4. All goods seized would be listed by the concerned officer.

Does the code of criminal procedure apply to the case of Seizure?

Yes, the code of criminal procedure will apply.

Other ways to inspect

The officer can also purchase the goods of any taxable person to check whether everything is maintained correctly.

Arrest under GST

If the commissioner believes that any taxable person has commenced an offense under section 132 of the GST Act, the accused can be arrested. The GST officers can also intercept the goods thatare already intransit.

Important: Please note that the information on this page / site is provided as general information for better understanding for the user and does not constitute tax, legal, or other professional advice and must not be used as such. Please consult your professional adviser(s) if you have any questions / doubts regarding the above.

Related Knowledge

Enhance your knowledge with

Subscribe To Our Newsletter

To get the latest news on changes of compliance