INSPECTION - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

2. INSPECTION 2.1. Inspection is a softer provision than search, which enables officers to access any place of business of a taxable person and also any place of business 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 only upon a written authorization given by an officer of the rank of Joint Commissioner or above. A Joint Commissioner or an officer higher in rank can give such authorization only if he has reasons to believe that the person concerned has done one of the following actions: (a) Suppression of any transaction relating to supply of goods or services or stock in hand; (b) Claimed excess input tax credit; (c) Contravention of any provisions of the Act or the Rules to evade tax; (d) Transporting or keeping goods which escaped payment of tax or manipulating accounts or Stocks which may cause evasion of tax. 2.2. Inspection can also be done of the conveyance, carrying a consignment of value exceeding specified limit. The person in charge of the conveyance has to produce documents/devices for verification and allow inspection. Inspection during transit can be done even without authorization of the Joint Commissioner. 2.3. Legal Framework for Inspection in GST: (i) As per Section 67(1) of the CGST Act, 2017, the Proper Officer should not be below the rank of Joint Commissioner of Central Tax. The Central Board of Indirect Taxes Customs (CBIC), vide Circular No. 3/3/2017 GST dated 5th July 2017, has assigned the functions of the Proper Officer for authorizing Inspection to the Additional Commissioner or the Joint Commissioner of Central Tax. The said proper officer can also authorize inspection of any place of business of any transporter or an owner or operator of a warehouse or a godown suspected of keeping goods, which have escaped payment of tax. (ii) Rule 139(1) of the CGST Rules, 2017, provides that the said proper officer shall issue an authorization in FORM GST INS-01 authorizing any other officer subordinate to him to conduct the inspection. 2.4. Officer of Central Tax competent to carry out Inspection: According to Section 67(1) of the CGST Act, 2017, the Proper Officer can authorize any other officer of Central Tax to carry out the Inspection. However, according to Rule 139(1) of the CGST Rules, 2017, the officer so authorized by the Proper Officer has to be subordinate to the Proper officer. This means that even though the officer so authorized can be any other officer, he should not be equal in rank or senior in rank to the Proper Officer. 2.5. Manner to conduct Inspection: The Proper officer can authorize a subordinate officer to carry out Inspection by issuing an Inspection Authorization in FORM GST INS-01 . The Inspection Authorization is generated online by the Proper Officer on the CBIC DIN Portal and contains the following important details: (i) Document Identification Number (DIN) of the Inspection Authorization; (ii) Name and designation of the officer authorized for Inspection; (iii) Address of the premises to be inspected; (iv) Period of validity of the Inspection Authorization; (v) Violations of law in respect of which reasons to believe have been formed by the Proper officer. 2.6. Persons in respect of whom Inspection can be authorized by the Proper officer: Inspection can be authorized by the Proper officer when he has reasons to believe that the specified violations of law have been committed by the following persons: (i) A taxable person; (ii) Any person, whether or not a taxable person, engaged in the business of transporting goods; or (iii) An owner or operator, whether or not a taxable person, of a warehouse or a godown or any other place. 2.7. Specified violations in respect of which reasons to believe have to be formed by the Proper Officer: In terms of clause (a) and clause (b) of Section 67(1) of the CGST Act, 2017, the violations, in respect of which reasons to believe, have to be formed by the Proper officer are as under: (I) Violations by a taxable person- (i) Suppressing any transaction relating to supply of goods or services or both; (ii) Suppressing the stock of goods in hand; (iii) Claiming input tax credit in excess of his entitlement; (iv) Contravention of any of the provisions of the CGST Act, 2017 or the Rules made thereunder to evade tax. (II) Violations by any person, whether or not a taxable person, engaged in the business of transporting goods- (i) Keeping goods which have escaped payment of tax; (ii) Keeping his accounts or goods in such a manner as is likely to cause evasion of tax. (III) Violations by an owner or operator, whether or not a taxable person, of a warehouse or a godown or any other place- (i) Keeping goods which have escaped payment of tax; (ii) Keeping his accounts or goods in such a manner as is likely to cause evasion of tax. 2.8. Places which can be inspected: Under Inspection, only places of business, as under, can be inspected: (i) Any places of business of the taxable person; (ii) Any places of business of the person engaged in the business of transporting goods, whether or not a taxable person; (iii) Any places of business of the owner or the operator, whether or not a taxable person, of warehouse or godown or any other place. 2.9. Inspection in movement: (I) Any consignment, exceeding value of Rs. 50,000/-, may be stopped at any place for verification of the documents/ devices prescribed for movement of such consignments. (II) If on verification of the consignment, during transit, it is found that the goods were removed without prescribed document or the same are being supplied in contravention of any provisions of the Act, then they can be detained or seized and may be subjected to penalties as prescribed.