Power of Inspection, Search, and Seizure – Section 67 of GST

Section 67 of the CGST Act, 2017 is a vital provision that grants powers to GST authorities to inspect, search, and seize goods, documents, or premises. These powers are primarily aimed at curbing tax evasion, uncovering fraudulent transactions, and ensuring compliance with the GST law.

Understanding this section is crucial for taxpayers, business owners, warehouse operators, and transporters. Let’s explore its scope, powers conferred upon GST officers, procedural requirements, and safeguards available to taxpayers.

Objective of Section 67 under CGST Act

The core intent behind Section 67 is to:

• Prevent tax evasion and fraudulent claims.

• Enable tax authorities to inspect premises and seize goods/documents.

• Safeguard government revenue through timely enforcement actions.

• Ensure that business operations remain compliant with GST laws.

Who Can Initiate Inspection and Search?

Only a proper officer not below the rank of Joint Commissioner can initiate action under this section. This ensures that the power is exercised judiciously and not misused by lower-ranking officers.

When Can an Inspection Be Conducted?

Inspection can be authorised when the officer has “reasons to believe” that:

• A taxable person has suppressed sales, stocks, or wrongly claimed Input Tax Credit (ITC).

• There is contravention of GST provisions aimed at evading tax.

• Goods are stored or transported without payment of tax.

• Accounts or records are maintained to facilitate tax evasion.

Upon such belief, the officer can authorize in writing another officer to inspect:

• Places of business.

• Warehouses or godowns.

• Premises of transporters or warehouse operators.

Search and Seizure Powers (Sub-section 2)

If during or after inspection, the proper officer believes that goods, documents, or books relevant to proceedings are concealed, he may:

• Search such premises.

• Seize goods and documents if they may be used in any proceeding under GST.

However, if seizure is not practical, an order may be issued to prevent removal or dealing with such goods, effectively placing them under custody.

Retention and Return of Documents (Sub-sections 3 & 5)

• Documents not used as evidence in proceedings must be returned within 30 days of notice issuance.

• Persons from whom documents are seized may make copies or take extracts, unless restricted for investigation integrity.

Powers to Break Open Premises or Storage Units (Sub-section 4)

Where access is denied, officers can seal or break open doors, boxes, digital devices, and containers to recover hidden goods or documents.

Provisional Release of Seized Goods (Sub-section 6)

Seized goods can be provisionally released upon:

• Execution of a bond.

• Furnishing security.

• Payment of applicable tax, interest, and penalty.

This ensures that business continuity is not disrupted unnecessarily.

Time Limit for Retention of Goods (Sub-section 7)

If no notice is issued within 6 months of seizure, the goods must be returned. The period can be extended once for another 6 months upon sufficient cause.

Disposal of Perishable or Hazardous Goods (Sub-sections 8 & 9)

Goods that are perishable, hazardous, or space-constrained can be disposed of early as per rules. An inventory must be prepared before disposal.

Applicability of Code of Criminal Procedure (Sub-section 10)

Search and seizure under GST follow principles of the Criminal Procedure Code (CrPC), 1973, with a key modification: the word “Magistrate” is replaced with “Commissioner”.

This ensures procedural fairness while granting authority to GST officers.

Seizure of Documents During Proceedings (Sub-section 11)

If a taxpayer is suspected of evading tax, the officer can seize books and records, grant a receipt, and retain them for as long as necessary for prosecution or proceedings.

Test Purchase by Department (Sub-section 12)

To verify if invoices or bills of supply are issued properly, the department can purchase goods or services as a test. Upon return, the seller must refund the amount and cancel the invoice.

This is a powerful deterrent against non-compliance.

Rule 139 of CGST Rules – Procedural Framework

Rule 139 outlines the procedure for inspection, search, and seizure:

• A written authorization (Form GST INS-01) must be issued.

• A seizure memo (Form GST INS-02) should accompany seized items.

• For goods placed under prohibition, Form GST INS-03 is used.

This ensures that the powers under Section 67 are not arbitrarily used and follow due legal process.

Key Takeaways for Businesses and Taxpayers

• Maintain transparent and accurate records.

• Avoid suppression of turnover or wrongful ITC claims.

• Ensure that stock, documentation, and tax invoices are compliant with GST provisions.

• Be aware of your rights if your premises are inspected or your goods/documents are seized.

Conclusion

Section 67 of the CGST Act is a strong enforcement tool available to GST authorities. While its objective is to ensure tax compliance, it also mandates a structured process to protect the rights of taxpayers. Businesses should stay informed and proactive in maintaining compliance to avoid unwanted legal consequences.

For professional assistance with GST compliance, inspections, or audit support, consult an experienced  Chartered Accountant to navigate the provisions of the GST Act effectively.