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Inspection Process under GST

In this article we will discuss the inspection process under GST:

What is the circumstance when the inspection takes place under GST?

Under GST, a joint commissioner or an officer of higher rank can carry out inspection process if he/she has reason to believe that the taxpayer has done the following thing to evade tax:

  1. Hidden any transaction of supply
  2. Hidden stock in hand
  3. Availed ITC (Input Tax Credit) in excess
  4. Contravened any of the GST provisions
  5. Maintaining books of account to evade tax
  6. Any warehouse operator or transporter hiding goods without paying GST on them

In such a case the joint commissioner or any other officer of higher rank can authorize any person to inspect places of businesses of through furnishing FORM GST INS-01:

  1. the taxpayer or
  2. Warehouse operator or
  3. the transporter

The officer can also inspect any other place if he/she deems fit.

Understanding the ‘Reasons to believe’ statement for Inspection!

Reason to believe for the inspection process means having factual knowledge of something (does not include direct knowledge) through which a reasonable person may reasonably conclude something.

According to the Indian Penal Code (IPC); “A person is said to have ‘reason to believe’ something if he has adequate grounds to believe that thing.”

In simple words, the reason to believe is purely determined by the person through examination and evaluation of fact that does not include his/her opinion.

Do an officer needs to mention a reason to believe in writing before issuing an inspection order?

No, there is no such provision under the GST Act that says the officer needs to state the reason to believe before issuing any order. The amendment  Section 132(1) & (1A) of Income Tax Act also states that the person needs not to mention the reason to believe to any person or the Appellate Authority or any other authority.

Difference between Inspection and Search

We often get confused with the word inspection and search under GST due to which we use these words interchangeably. However, there is a fine line between these two words; let us see how these two words distinct from each other:

Search under GST Inspection under GST
Search is an attempt made by the government official either by a tax officer or police officer as the case may to examine a person, place, object, and so forth so as to find evidence of a crime. The search under GST can only be carried out under the valid authority of law. On the other hand Inspection under GST is a softer provision that permits the officer to access any place of business of the following persons

  1. A taxpayer
  2. A transporter
  3. A warehouse operator or owner

Who and when can order search under GST?

The joint commissioner or any other higher rank officer can order search under GST based on inspection or if he/she has a “reasons to believe”. The order can be passed under GST when:

  1. Goods that need to be confiscated
  2. Any books of accounts or documents that are hidden which can be useful for proceedings

Moreover, in such a case the joint commissioner or any other officer of higher rank can authorize any person to search and seize the goods.

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GST Compliance