Evidence Rules in GST Proceedings: A Strategic Guide for Tax Leadership

Navigating the complexities of evidence requirements under the Central Goods and Services Tax Act, 2017

The Evidence Landscape in GST

The goods and services tax (GST) regime, implemented from July 1, 2017, has fundamentally transformed India's indirect tax framework. With this transformation came sophisticated evidence requirements that directly impact business operations, compliance obligations, and dispute resolution processes.

Current Evidence Framework:

• Section 145 of the CGST Act specifically addresses admissibility of electronic documents, microfilms, and computer printouts

• The Bharatiya Sakshya Adhiniyam, 2023 has replaced the Indian Evidence Act, 1872, introducing new provisions for electronic and digital records

• Section 155 places the burden of proof on taxpayers claiming input tax credit (ITC)

• GST authorities possess extensive powers under Sections 67-71 for search, seizure, audit, and inspection

Key Evidence Categories Required:

• Business registration documents and constitutional papers

• Tax invoices, credit/debit notes, and bills of supply

• Books of account and financial records

• E-way bills and transportation documents

• Bank statements and payment records

• Import/export documentation

• Electronic records and digital communications

Critical Legal Provisions and Recent Changes

Primary Legislative Framework

Section 145 - Admissibility of Electronic Documents:

Microfilms, facsimile copies, computer printouts, and electronically stored information 

shall be deemed documents and admissible as evidence without further proof of the original

Section 155 - Burden of Proof for ITC:

Where any person claims input tax credit eligibility, the burden of proving such claim 

shall lie on such person

Bharatiya Sakshya Adhiniyam, 2023 - Game-Changing Provisions

New Definition of Evidence (Section 2(e)):

• Electronic statements now constitute oral evidence

• Electronic and digital records are documentary evidence

• Expanded scope includes emails, server logs, smartphone data, and website information

Section 61 - Electronic Record Admissibility:

Electronic or digital records shall have the same legal effect, validity and enforceability 

as other documents, subject to certification requirements

Section 63(4) - Certification Requirements: Electronic records must be accompanied by certificates from persons in charge of computer systems or communication devices, verified by experts.

Enforcement Powers

Section 67 - Search and Seizure Powers:

• Joint Commissioner level authorization required

• Goods, documents, and "things" can be seized

• Electronic devices and digital storage media included

Section 70 - Summoning Powers:

• Officers can summon persons to give evidence or produce documents

• Civil court procedures apply

• Penalty up to ₹25,000 for non-compliance

Strategic Implications for Business Leadership

1. Compliance Risk Matrix

High-Risk Areas:

• ITC Claims: Complete documentary trail required from supplier verification to physical receipt

• Digital Records: New certification requirements may invalidate previously acceptable electronic evidence

• Cross-Border Transactions: Enhanced documentation for import/export claims

• Service Transactions: Proving physical execution and delivery of services

2. Technology and Evidence Management

Critical Challenges:

• Legacy Systems: Older ERP systems may not generate BSA 2023-compliant certificates

• Cloud Storage: Questions around jurisdiction and certification for cloud-based records

• Mobile Communications: WhatsApp messages, emails now explicitly recognized as evidence

• Data Integrity: Enhanced requirements for proving authenticity of electronic records

3. Audit and Investigation Preparedness

Key Considerations:

• 15-day notice required for audits, but search/seizure can be immediate

• Document retention mandatory for 72 months (6 years)

• Cross-examination rights limited but critical for disputed evidence

• Expert opinions increasingly important for technical matters

4. Financial Impact Assessment

Potential Exposures:

• Penalty Structure: 10% of tax or ₹10,000 (whichever higher) for non-fraudulent cases

• Criminal Liability: Imprisonment possible for tax evasion exceeding ₹1 crore

• Interest Costs: Accumulating during prolonged disputes

• Opportunity Costs: Management time and legal expenses

Action Items for Tax Leadership

Immediate Actions (Next 30 Days)

1. Evidence Policy Review

   • Audit current document retention policies against 72-month requirement

   • Identify gaps in electronic record certification processes

   • Update internal audit checklists to include BSA 2023 requirements

2. Technology Assessment

   • Evaluate ERP systems for BSA 2023 compliance capabilities

   • Implement automatic certificate generation for electronic records

   • Establish secure digital storage protocols with proper access controls

3. Team Training

   • Brief finance teams on new evidence standards

   • Train procurement teams on supplier verification requirements

   • Update legal team on cross-examination rights and procedures

Medium-term Strategy (Next 90 Days)

4. Supplier Due Diligence Enhancement

   • Implement real-time GST portal verification before order placement

   • Establish documentary requirements for physical delivery verification

   • Create supplier audit protocols for ITC eligibility

5. Internal Controls Strengthening

   • Develop standard operating procedures for evidence collection

   • Implement segregation of duties for document verification

   • Create exception reporting for incomplete documentation

6. Risk Management Framework

   • Establish early warning systems for compliance gaps

   • Create rapid response protocols for notice/summons receipt

   • Develop contingency plans for search/seizure scenarios

Long-term Positioning (Next 12 Months)

7. Digital Transformation

   • Migrate to fully integrated, audit-trail enabled systems

   • Implement blockchain or similar technologies for immutable records

   • Develop AI-powered compliance monitoring tools

8. Professional Development

   • Engage specialized GST litigation counsel

   • Establish relationships with forensic accountants

   • Create internal expertise in electronic evidence management

9. Strategic Compliance

   • Conduct annual GST audits by external experts

   • Implement proactive disclosure policies for identified errors

   • Develop industry best practice benchmarking

Critical Success Factors

Executive Sponsorship: C-suite commitment to compliance culture and resource allocation

Cross-functional Coordination: Integration between legal, finance, IT, and operations teams

Continuous Monitoring: Real-time compliance dashboards and exception reporting

Professional Expertise: Access to specialised legal and technical expertise

Documentation Excellence: Maintaining evidence standards that exceed minimum requirements

The evolving evidence landscape in GST proceedings demands proactive adaptation of business processes, technology systems, and compliance frameworks. Organisations that treat evidence management as a strategic capability rather than a compliance burden will be better positioned to navigate disputes and minimise tax risks.

Powers of GST Officers | GST Audit Procedure | Audit U/S 65(3) (GST ADT-01) | Matching Reversal and Reclaim of ITC | GST Audit Checklist