On July 1, 2017, India implemented the Goods and Services Tax (GST), which is a comprehensive, multi-stage, destination-based tax system. It took the place of excise duty, value-added tax, and service tax, among other indirect taxes imposed by the federal and state governments.
All goods and services are subject to GST taxation at various stages of production and distribution, with taxation collected at the point of consumption. The expense is exacted on the worth added to labor and products at each phase of creation or circulation.
By bringing all taxes under one roof, GST has made the indirect tax system in India easier to understand. Businesses can now claim an input tax credit for the taxes they pay on their purchases of goods and services, thereby reducing their tax burden, as it has also eliminated the cascading effect of taxes.
GST is separated into three classifications: State GST (SGST), Integrated GST (IGST), and Central GST (CGST). The central government imposes IGST on interstate transactions, while the state governments impose CGST and SGST on intrastate transactions, respectively.
The GST Committee, comprising the money priests of the focal and state legislatures, is answerable for making proposals on the rates, exclusions, and edge cut-off points of GST. The council meets regularly to examine and adjust the GST rates for various goods and services.
In general, the way indirect taxes are collected in India has changed significantly as a result of the GST. By bringing more businesses into the tax net, it has simplified the tax system, reducing the tax burden on businesses, and increased compliance. However, the government continues to address issues with compliance and technological glitches that have hampered the implementation of GST.
In India, the supply of goods and services is subject to the Goods and Services Tax (GST). It is a comprehensive indirect tax that has taken the place of numerous previous taxes like the Value Added Tax (VAT), Central Excise Duty, and Service Tax. The GST Act mandates the appointment of officers to oversee the GST, and these officers are granted specific authority to carry out their duties. The ability to conduct searches and seize cash or other valuables is one of these powers. In this article, we will talk about GST search activities and the officials’ more right than wrong in holding onto cash.
Search under GST Act in India
Under the GST Act, the Commissioner or any officer he or she has authorized may authorize an officer to search for any place of business, such as a factory, warehouse, godown, or other premises where goods are stored, or any place where it is believed that goods subject to tax are kept. The officer searching must adhere to certain guidelines and procedures. Section 67 of the Central Goods and Services Tax (CGST) Act of 2017 contains provisions regarding search operations.
A search warrant from the Magistrate or the authorized officer must be obtained by the officer before the search can begin. However, the officer may search without a warrant in certain circumstances, such as when the goods or documents are likely to be removed or tampered with or when the delay in obtaining the warrant may result in the destruction of evidence. In such instances, the officer is required to write down the reasons why the warrant was not obtained.
During the inquiry activity, the official has the capacity to:
- Enter and search for any place of business where it is believed that tax-exempt goods are kept.
- Seize any books, documents, or other items that could be useful in a GST Act proceeding.
- Make identification marks on the items and goods being inspected by him.
- Keep a record of any statements made by the place of business’s manager or anyone else present during the search.
- Seal the premises or products assessed by him.
- Seize and detain any tax-exempt goods for which there is no appropriate documentation.
Officers’ Right to Take Cash
Cash is one of the things that can be taken during a GST search. Any cash that is discovered during the search can be confiscated by the officer searching. However, the officer can only seize cash if he believes that the cash is missing or being used for illegal purposes.
The officer is required to prepare a Panchnama, also known as a seizure memo, in which he records the details of the seized cash, such as the notes’ denomination, the total amount seized, and the cash’s source. The person from whom the cash was seized and two independent witnesses must sign the Panchnama, or seizure memo.
The official is expected to give a notification to the individual from whom the money was seized, educating him regarding the explanations behind the seizure and how much money was seized. The individual from whom the money was seized can record an application for the arrival of the money with the official, alongside proof to help his case. If the officer is satisfied that the cash is not missing or being used for illegal activities, he will then release it.
What is Inspection under GST?
Inspection under GST refers to the process of examining or scrutinizing the records, books of accounts, and other documents of a registered person to ensure that they are complying with the provisions of the Goods and Services Tax (GST) Act. The purpose of the inspection is to verify that the taxpayer is correctly discharging their GST liabilities, maintaining proper books of accounts, and adhering to other compliance requirements.
The inspection may be carried out by an officer authorized by the Commissioner of Central Tax or State Tax, either on their own accord or based on specific information or complaints. The officer may inspect the registered person’s place of business or any other place where they carry out business activities.
The officer conducting the inspection has the power to:
- Inspect and examine the books of accounts, registers, and other documents maintained by the registered person to ascertain their compliance with the GST Act.
- Make copies or take extracts from the books of accounts and other documents.
- Record the statements of the registered person or any other person connected with the business activities.
- Seize any documents, books of accounts, or other records that are necessary for the examination.
The registered person is required to provide all necessary assistance to the officer conducting the inspection and is required to produce all the relevant documents and records. Failure to comply with the inspection process or to provide the necessary documents may result in penalties and other consequences under the GST Act.
It is important to note that inspection under GST differs from search and seizure operations. While inspection is carried out to verify compliance, search, and seizure operations are carried out to detect tax evasion and other illegal activities. The officer carrying out the inspection must follow the prescribed procedures and guidelines and ensure that the rights of the registered person are protected.
Meaning of ‘reason to believe under GST
Under the Goods and Services Tax (GST) Act, an officer authorized by the Commissioner of Central Tax or State Tax may inspect the registered person’s place of business to ensure compliance with the GST Act. During the inspection, the officer has the power to inspect the books of accounts, registers, and other documents, record statements, and seize any documents that are necessary for the examination.
However, the officer must have “reasons to believe” before initiating the inspection. The term “reasons to believe” means that there must be some credible information or evidence available to the officer, which leads them to believe that there is a possibility of non-compliance with the GST Act by the registered person. The reasons to believe may be based on specific information or intelligence, a complaint received, or any other valid grounds.
The reasons to believe should not be based on mere suspicion or conjecture. The officer must have a reasonable basis for believing that there is a likelihood of non-compliance before initiating the inspection. In case the officer initiates the inspection without any valid reasons to believe, it may be considered an abuse of power and may attract legal consequences.
It is important to note that the reasons to believe must be recorded in writing by the officer before initiating the inspection. The written reasons must be specific and based on objective facts, and not merely a general assertion of non-compliance. The recorded reasons must be communicated to the registered person at the time of inspection.
Seizure under GST Act in India
When the GST authorities take possession of any goods, documents, or assets as a result of non-compliance with the provisions of the GST Act, this is referred to as “seizure.” Either an arrest or an inspection, search, and seizure operation can lead to the seizure. A seizure memo detailing the seized goods or assets and their reasons must be provided by the GST officer. The owner of seized goods or assets has the right to present their case to the appropriate authorities and request the release of those items.
What is the Procedure for a Seizure?
The procedure for seizure under GST in India involves the following steps:
Step 1: The GST officer must have a valid reason to seize the goods or assets.
Step 2: The officer must issue a show-cause notice to the person whose goods or assets are being seized.
Step 3: The person whose goods or assets have been seized can make a representation to the proper authorities within a specified period.
Step 4: The officer must prepare a seizure memo specifying the goods or assets seized, and the reasons for the seizure.
Step 5: The seized goods or assets must be stored in a safe and secure place.
Step 6: The officer must release the seized goods or assets if the proper authorities are satisfied with the representation of the person whose goods or assets have been seized.
The procedure for seizure under GST is intended to ensure that the rights of the person whose goods or assets are being seized are protected and that the seizure is carried out transparently and fairly.
The maximum period for which books and documents will be detained with the officer?
The Goods and Services Tax (GST) Act says that books and documents seized by a GST officer during an inspection or search and seizure must be returned within 30 days if the right authorities are satisfied that the books and documents are no longer needed for an investigation.
After a seizure under GST (Goods and Services Tax), the tax authorities can take possession of the seized goods or assets. The taxpayer will be served with a notice specifying the grounds for the seizure, and they will have an opportunity to be heard before the goods are confiscated. If it is determined that the seized goods or assets are liable for GST, they may be sold by the authorities to recover the unpaid tax. In certain cases, criminal proceedings may also be initiated against the taxpayer for non-compliance with GST laws.
The officers’ right to seize cash and the GST search operations are important tools for enforcing the GST Act. To prevent tax evasion and ensure compliance with the law, these powers are required. However, it is critical that these powers are used fairly and openly, and that the rights of the person whose money is seized are safeguarded.