INGREDIENTS FOR ACCESS TO BUSINESS PREMISES BY PROPER OFFICERS

[Dr. Sanjiv Agarwal]

Section 71 of CGST Act, 2017 authorizes officers not below the rank of Joint Commissioner to have access to any place of business of a registered person to inspect books of account, documents, computers, computer programmes, computer software and such other things as may be required and which may be available at such place, for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

Further, an audit party of CGST or a cost accountant or chartered accountant nominated under section 66 have access to any business premises without issuance of a search warrant for the purposes of revenue carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest revenue.

Section 71 of the CGST Act, 2017, provides for allowing for access to the business premises of a taxable person. While ‘business premises’ has not been defined in the GST law, the terms business [section 2(17)], place of business [section 2(85) and principal place of business [section 2(89)] have been defined in the CGST Act, 2017.

These terms are explained hereunder:

Business [Section 2(17)]

As per section 2(17) of the CGST Act, 2017, business includes :

1. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
2. any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
3. any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
4. supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
5. provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
6. admission, for a consideration, of persons to any premises;
7. services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
8. activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
1. any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;

This definition is an inclusive definition wherein all types of transactions or activities including incidental or ancillary to trade, commerce, manufacture, profession, vocation, adventure or wager or other similar activities are covered. It is immaterial whether such transactions are for pecuniary benefit or not. These terms have not been defined. ‘Agriculture’ has not been specifically included in ‘business’.

In Income Tax, ‘business’ has been defined to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. According to Halsbury (4th edition, Vol. 27), the word ‘business’ extends the covenant to all cases where work, involving the recourse of numerous persons to the premises, is done for payment, or even without payment where the result is in effect the same as if a charge were made. The making of profit is not essential to constitute a business; nor, on the other hand, does payment necessarily constitute one.

The Supreme Court in STATE OF ANDHRA PRADESH VERSUS ABDUL BAKHI & BROS. - 1964 (4) TMI 75 - SUPREME COURT, held as under:

“The expression “business” though extensively used a word of indefinite import, in taxing statutes it is used in the sense of an occupation, or profession which occupiesthe time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure.”

Business includes:

(a)   day-to-day running of the business,

(b)  rationalization of business administration and modernization of machinery of business,

(c)   preservation of business and protection of its assets and property from expropriation, coercive process or assertion of hostile title,

(d)  payment of statutory dues and taxes imposed as pre-condition for commencement or carriage of business,

(e)   things incidental to carriage of business [BIRLA COTTON SPINNING & WEAVING MILLS LTD. VERSUS COMMISSIONER OF INCOME-TAX, CALCUTTA. - 1967 (3) TMI 104 - CALCUTTA HIGH COURT affirmed,COMMISSIONER OF INCOME-TAX, WEST BENGAL I VERSUS BIRLA COTTON SPINNING AND WEAVING MILLS LIMITED - 1971 (8) TMI 9 - SUPREME COURT].

The definition of the term ‘ business’ is important from the point that supplies of taxable goods and/or services made in the course or furtherance of business are taxable. Any supplies of goods and/or services which is not made in the course or furtherance of business will not be covered by the definition of Supply.

However, the importation of services whether or not in the course or furtherance of business, will be considered as a Supply.

It is important to note that for coverage under the term business, the intention to earn profit out of it will not be considered. Even if there is no intention to make profit out of it, still the transaction may be covered in the definition of ‘business’. For example, supply of goods by an association to its members.

Place of Business [Section 2(85)]

As per section 2(85) of the CGST Act, 2017, ‘place of business’ has been defined as an inclusive definition and it includes -

(a)   a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods and/or services; or

(b)  a place where a taxable person maintains his books of account; or

(c)   a place where a taxable person is engaged in business through an agent, by whatever name called.

Place of business would include the following places :

(a)   place from where business is ordinarily carried on,

(b)  warehouse,

(c)   godown,

(d)  any other place used for storing goods or place to provide or receive goods or services by taxable person,

(e)   place where books of accounts are maintained by taxable person (it may be place of business of agency or any professional),

(f)   place from where a taxable person is engaged in business through agent by whatever name called (like commission agent, C&F agent, consignment agent etc)

It will include any one or more or all of the aforementioned places.

It will include any one or more or all of the aforementioned places. Registration of a taxable person is done in reference to his place of business. Address of place of business becomes the registered address, where all the correspondence in relation to GST law will be done. Even the place where the business is carried through an agent will also be called place of business and will be required to be registered.

Principal Place of business [Section 2(89)]

As per section 2(89) of the CGST Act, 2017, ‘principal place of business’ means the place of business specified as the principal place of business in the certificate of registration.

For a place of business to be a ‘principal place of business’, following conditions are essential –

(a)   It should be a place of business

(b)  It should be specified as such in registration certificate

(c)   Taxable person may keep and maintain the accounts and records

Section 35 of the CGST Act, 2017, provides for maintenance of accounts and other records by a registered person at his principal place of business, the true and correct account of –

●     Production or manufacture of goods

●     Inward or outward supply of goods/services

●     Stock of goods

●     Input tax credit availed

●     Output tax payable and paid

●     Such other particulars as prescribed

It also provides that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business concerned.

Proper officer [Section 2(91)

“Proper officer” in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board.