GST INVESTIGATIONS – RECENT DGGI GUIDELINES

[Dr. Sanjiv Agarwal]

Chapter XIV on Inspection, Search, Seizure and Arrest (Sections 67 to 72) and Chapter XIX on Offences and Penalties (Sections 122 to 138) covers the relevant provisions in GST law (i.e., CGST Act, 2017) on GST investigations.

The provisions of inspection, search and seizure provides enough safeguards and the GST Law stipulates that search of any place of business etc. can be carried out only under authorization from an officer not below the rank of Joint Commissioner and if he has a reason to believe. The term ‘inspection’  in common parlance,  is a softer provision than search which enables officers to access any place of business or of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown. The inspection can be carried out by an officer of CGST/SGST only upon a written authorization given by an officer of the rank of Joint Commissioner or above.

In the administration of taxation, the provisions for arrests are created to tackle the situations created by some unscrupulous tax evaders. To some these may appear very harsh but these are necessary for efficient tax administration and also act as a deterrent and instill a sense of discipline. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorization from the Commissioner. Besides this, the GST Law also stipulates that arrests can be made only in those cases where the person is involved in offences specified for the purposes of arrest and the tax amount involved in such offence is more than the specified limit.

Section 69 empowers the Commissioner of CGST or SGST to arrest any person where he has reasons to believe that such person has committed an offence under section 132 (1) (a, b, c, d) and punishable under section 132(1) (i, ii) or 131 (2).

In case of summons, section 70 of CGST Act, 2017 empowers the proper officer under the GST Act in the process of making any enquiry and to give evidence or to produce a document or any other thing.

The CGST Act, 2017 in section 71 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.

Section 129 of CGST Act, 2017 read with Rules 138 to 138E of CGST Rules, 2017 makes it obligatory on the taxable person the requirements of e-way bills and tax invoice- both generation and preservation of the same. Under the CGST Act, 2017, goods can be confiscated in certain circumstances as provided in section 130 of the CGST Act, 2017. The consequences of confiscation are that the ownership in goods post confiscation does not remain with the owner of goods and it vests with the Government or any other person who has confiscated the goods. Section 129 deals with the provisions relating to detention of goods and conveyance, seizure of goods and conveyance, release of goods and conveyance while they are in transit.

DGGI Instructions

Recently Directorate General of GST Intelligence (DGGI) has issued guidelines for conducting investigations in certain cases, which is an operating procedure for investigation that keeps in view the ease of doing business with tax payers / assessees (vide F.No. DGGI/17/2023-INV-O/o Pr DG-DGGI-HQ-DELHI(1) dated 08.02.2024 issued by DGGI, New Delhi)

The officers of Directorate General of GST Intelligence (DGGI) across the country at its Headquarter, the 26 Zonal Units (ZU) and 40 Regional Units (RU) have all-India jurisdiction for the purposes of their role in the compliance management framework of Goods and Services tax (GST) and Central Excise. Under GST, investigation may be made by DGGI or jurisdictional CGST formations or the States.

CBIC has approved a detailed standard operating procedure (SOP) for officials of the Directorate General of GST Intelligence (DGGI) to improve the ease of doing business and prevent any incident of harassment of taxpayers during tax investigations, summons, and searches.

This SOP mandates officials to stick to Goods and Services Tax (GST) cases within their zonal units for investigation, skip investigation which fall under the ambit of audit and scrutiny and issue summons with specific details of subject of enquiry and clear timelines and not for vague and piecemeal information, which can be submitted in written.

The operating procedure shall be followed in initiation or conduct of investigations and relate to :

• Jurisdiction
• Initiation & follow-up
• Summons
• Precautions and specific aspects in investigation
• Grievance redressal

The following are the highlights of the Guidelines / SOP :

• The nature of investigation being taken up by DGGI should not take up a role not assigned in DGGI charter.
• Zonal Unit of DGGI (ZU) shall avoid taking up such functions, under provisions of law/rules, that more appropriately fall in the purview of return scrutiny or audit, etc.
• The Principal ADG/ADG of a ZU shall be responsible for approving, developing any intelligence, conducting search and completing the investigation in a case and the relevant subsequent action, including in the RUs etc.
• A ZU shall normally not initiate investigation related to an aspect leading to tax demand notice on a taxpayer/GSTIN located outside jurisdiction allocated to it in geographical terms.
• Where a ZU has, on a particular issue, initiated investigation against a taxpayer within its own jurisdiction, the investigation on the same issue with respect to registrations (GSTINs) of the same taxpayer (single PAN) in other State(s) can be conducted without seeking approval for inter-ZU investigation.
• In case of multi state entities, one of the ZUs may be designated for conducting such investigation by the DG (or Principal DG if more than one SNU is involved.

• In the case of record-based investigations, only a ZU which has the entity registered in its geographical jurisdiction is to initiate the investigation.
• Each investigation must be initiated only after approval of Principal ADG/ADG of ZU, except in following situations where prior approval of higher officer, shall be required:

(A) Prior written approval of the DG of SNU if investigation is to be initiated and action to be taken in a case falling under the following four categories, namely case involving (i) matters of interpretation seeking to levy tax/ duty on any sector/ commodity/ service for the first time, whether in Central Excise or GST; or (ii) big industrial house and major multinational corporations; or (iii) sensitive matters or matters with national implications; or (iv) matters which are already before GST Council. Moreover, for cases of the category (iii) or (iv), before any precipitative action is taken in investigation, the respective Sub-National Unit of DGGI (SNU) shall necessarily bring the matter to the notice of the Principal DG.

 (B) Initiating investigation related to an aspect leading to tax demand notice on a taxpayer/GSTIN located outside jurisdiction allocated to a ZU.

• A ZU can continue to undertake follow-up action in an ongoing investigation in jurisdictions of other ZUs without referring the matter to the DG or Principal DG.
• A summons should not be used as means to seek information filled in formats or proforma (specified by investigation)
• Vague (or general) expressions, such as that the officer is making inquiry in connection with "GST enquiry" or "evasion of GST" or "GST evasion" etc. must not be mentioned in the letter/summons to a regular taxpayer.
• Information available digitally/online on GST portal should not be called for under letter/summons from a regular taxpayer.
• Addressing letter/summons with context or content akin to a fishing inquiry is not allowed.
• In issuing summons, the norm shall be of prior reasoned approval (of officer not below Dy/Asst. Director level) of the content of the summons to be printed by the summoning officer, including in terms of what is being sought and the time frame to be provided being reasonable for its compliance.
• Before summoning any information or documents from a regular taxpayer, the relevancy and propriety of what is being sought must be recorded (on e-file), ensuring that it is holistic and result of preparation, so as not to have repeated issuance of summons seeking piecemeal information.
• In case of questioning and searches, the statement and outcome must be uploaded in the system within four working days.
• When in a case initiated by DGGI, it comes to notice that CGST Zone and/or State GST are also looking at the taxpayer, then the Zonal Unit must dialogue with other investigating office(s) and consider feasibility of one of the offices pursuing all these subject matters with respect to the taxpayer.
• In case of investigation with respect to a listed company or PSU or corporation, or government department of agency, the DGGI must send official letters instead of summons to the designated officer of such entity, with the reasons for investigation, the legal provisions therefore, and giving a reasonable time period for submitting their response.
• Investigation must be concluded within a year and issuing any show cause notice should not be delayed after conclusion of investigation.
• Conclusion of investigation may also take the form of recording that investigation is not being pursued further as nothing objectionable was found in terms of matter investigated.

This set of guidelines supersedes earlier guidelines dated 18.09.2023 as amended on 08.12.2023.