Offence under GST


Offence under GST

An offence is defined as a breach of a law or rule, i.e. an illegal act. Similarly an offence under GST is a breach of the provisions of the GST Act. There are 21 offences under GST, which we have classified under the following sections, for your easy reference:

Fake or Incorrect Invoices / Bills

A taxable person indulges in the following GST offences:

  • Supplies any goods / services without any invoice or issues a false invoice
  • Issues any invoice or bill without supply of goods and / or services in violation of the provisions of GST
  • Issues invoices using the identification number i.e. GSTIN of another bona-fide taxable person


A taxable person indulges in the following offence under GST:

  • Submits false information while registering under GST
  • Submits fake financial records or documents or files fake returns to evade taxes
  • Does not provide information or provides false information during proceedings

Tax Evasion

A taxable person indulges in the following offences under GST:

  • Collects GST, but does not submit it to the government within 3 months
  • Collects GST by breaking the provisions, but fails to deposit it to the government within 3 months, which will still be treated as an offence under GST
  • Obtains refund of any CGST / SGST by fraud
  • Takes and / or utilizes ITC without actual receipt of goods and / or services
  • Deliberately suppresses his sales to evade taxes

Supply or Transport of Goods

A taxable person indulges in the following offences in GST:

  • Transports goods without proper documents
  • Supplies or transports goods, which he knows will be confiscated
  • Destroys or tampers goods which have been seized

Other offences under GST

A taxable person:

  • Has not registered under GST although he is required to register under the law
  • Does not deduct TDS or deducts less amount than what is applicable
  • Does not collect TCS or collects less amount than what is applicable
  • Takes or distributes input tax credit in violation of the rules, being an Input Service Distributor
  • Obstructs the proper officer during his duty, for instance, during audit
  • Does not maintain all the books that he is required to maintain under the law
  • Destroys any kind of evidence

For all the 21 offences in GST listed above, penalty will be a minimum of INR 10,000, with variations in place, depending of the nature of the offence under GST.

Arrest under GST


Arrest under GST

The term ‘Arrest’ has not been defined in the CGST / SGST Act. However, as per the law, it basically implies the taking into custody of a person under some lawful command or authority. In other words, a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful warrant.

If the Commissioner of CGST / SGST believes that a person has committed an offence, he can be arrested by any authorised CGST / SGST officer. The arrested person will be informed about the grounds of his GST arrest motion, and he will appear before the magistrate within a period of 24 hours, in case the offence is of a cognizable nature.

As per the arrest provisions under GST, the following officers have been empowered and are required to assist the CGST / SGST officers in the execution of an arrest under GST:

  • Police
  • Railways
  • Customs
  • Officers of State / UT / Central Government engaged in collection of GST
  • Officers of State / UT / Central Government engaged in collection of land revenue
  • All village officers
  • Any other class of officers as may be notified by the Central/State Government

Note: Here, it is important to note the difference between a cognizable and a non-cognizable offense. Cognizable offenses are those where the police can arrest a person without any arrest warrant, i.e. the offense is clear enough. Examples could be murder, robbery, counterfeiting etc. Non-cognizable offenses are those, where a police officer cannot arrest a person without a warrant issued by a competent authority. They are relatively less serious crimes like public nuisance, assault etc.

Offenses which warrant Arrest under GST

The following are the offenses, for which the arrest provisions under GST become applicable:

  • When a taxable person supplies any goods or services without any invoice or issues a false invoice
  • When a taxable person issues any invoice or bill without supply of goods / services in violation of the provisions of GST
  • When a taxable person collects GST, but does not submit it to the government within 3 months
  • When a taxable person has already been convicted earlier under the same provisions i.e. this is his 2nd offense

To sum up the offences which warrant arrests, broadly it may be said, that if tax evasion is more than INR 100 lakhs i.e. INR 1 Crore, or when a person has committed his 2nd offense (i.e. first arrest under GST has occured already), an arrest will be made.

Procedures related to Arrest under GST – Points to Note

The following are certain key procedures that you should note with regards to arrest provisions in GST:

  • Cognizance of Offense – A court cannot take cognizance of any offense punishable without the prior permission of the designated authority. Only a Magistrate of the First Class (and above) can conduct the trial for such an offense.
  • Availability of Bail – Bail is available only for non-cognizable and specified bail-able offenses.
  • Summons – A proper officer can summon any person to provide evidence or to produce a document. Any person summoned, has to either attend the summon himself, or send an authorized representative. Both entities will appear under oath.

Taking a holistic view of inspection, search, seizure and arrest under GST, it can be concluded that the government as well as the GST body have well defined arrest provisions in GST, to restrict tax evasion activities across the nation. Given the stringent nature of these offenses, which attract sizeable penalty, taxpayers would hopefully be discouraged from engaging in any illegal business practices.

Seizure under GST


Seizure under GST

The term “Seizure” has not been specifically defined under GST. In legal terms, seizure under GST implies the act of taking over something or someone by force through a legal process, such as, the seizure of evidence found at the scene of a crime. It generally means – taking possession forcibly against the wishes of the owner.

Difference between Detention and Seizure under GST

In this context, most taxable persons may be confused about the difference between detention and seizure under GST. Detention is basically the act of not allowing the owner any access to the seized goods under GST, by means of a legal order or notice. In case of a detention, the ownership and possession of goods still lie with the owner, and it is issued, only when it is suspected that the goods are liable for confiscation.

However, seizure is actually taking over or possessing the goods by the department, although the ownership stays with the owner. A seizure under GST can be made only after inquiry or investigation that the goods are liable to confiscation.

Procedure for Seizure under GST

The following are the provisions pertaining to seizure of goods under GST:

  • The proper officer will give an order of seizure of goods under GST in Form GST INS-02
  • The officer authorized to search will have the power to seal the door of the premises. He can also break open the door of any premises, in case access is denied. He can also break open any cupboard or box in which goods, books, documents etc. are suspected to be concealed
  • However, if it is not practical to seize the goods, the proper officer will order the owner not to remove these goods without the prior permission of the officer. The officer will issue an order of prohibition in Form GST INS-03
  • The officer will keep the books and documents as long as it is necessary for examination and inquiry
  • Other books which are not relevant to the issue of notice will be returned within 30 days from the date of the notice
  • The seized goods under GST can be released on a provisional basis against a bond, for the value of the goods in Form GST INS-04. The owner must also furnish a security in the form of a bank guarantee for the amount due i.e. the applicable tax, interest and penalty payable
  • If the owner fails to produce the provisionally released goods at the appointed date and place, then the security will be encashed and adjusted against the amount due
  • Provisions of the Code of Criminal Procedure will apply to search and seizure of goods in GST

Post-Seizure Procedures

  • Goods – Post the seizure in GST, all the goods which have been taken into custody will be properly listed by an officer. The goods will then be divided into hazardous and non-hazardous, and also into perishable and non-perishable. The government can issue a list of hazardous or perishable goods which can be disposed as soon as they are seized. Also, post the seizure in GST, a notice is to be issued by the department. If the notice is not issued within 6 months, from the date of seizure of goods in GST, they will need to be returned. This time limit is extendable by 6 more months.
  • Documents – In case the person who is the owner of the documents, wants to make copies, he can do so in presence of the officer.

Post inspection, search and seizure under GST, if the Commissioner believes that a person has committed an offence under the requisite section of the GST Act, the concerned person can be arrested. In our next blog, we will understand the specific provisions laid down for Arrest under GST.

Inspection and Search under GST


Inspection and Search under GST are conducted as per the provisions laid down in the GST law. Let us understand them one by one.

Inspection under GST

A Joint Commissioner (or any officer of a higher rank), may conduct an inspection under GST, only via written authorization, if they have reasons to believe that a taxable person has done any of the following, in order to evade tax:

  • Suppressed any transaction of supply
  • Suppressed stock in hand
  • Claimed input tax credit in excess
  • Violated any of the provisions
  • Kept goods which have escaped payment of tax
  • Kept accounts and / or goods in such a way as to evade tax

Now, if you read the section above, you will come across a phrase “reasons to believe”. What do we mean by “reasons to believe” under the GST provisions? As per the GST rules, “reason to believe” means, having knowledge of facts, that would make any reasonable person, knowing the same facts, to reasonably conclude the same thing. As per the Indian Penal Code, a person is said to have “reason to believe” a thing, if he has sufficient cause to believe that thing but not otherwise. This will be something that will be based on examination and evaluation, and not on something which is an opinion. In short, “reasons to believe” will be based on facts rather than interpretation of facts. Also, this should be something, which should not be mentioned in writing at any stage. In fact, as per the GST rules, “reasons to believe” shall not be disclosed to any person or any authority or the Appellate Tribunal.

In any case, once the Joint Commissioner (or any officer of a higher rank) is clear that action has to be taken, he can then authorize any officer via Form GST INS-01 to inspect places of businesses, belonging to the following entities:

  • Taxable person
  • Transporter
  • Owner or Operator of the Warehouse
  • Any other place, as deemed fit

Search under GST

On the face of it, “Search” and “Inspection” may sound like the same activity. Hence, before understanding the provisions for Search under GST, it is important to understand the difference between Inspection and Search in GST.

Search under GST Inspection under GST
Involves an attempt to find something. Search is an action of a government official (a tax officer or a police officer, depending on the case) to go and look through or carefully examine a place, person, object etc. in order to find something concealed or to discover evidence of a crime. The search of a person, or vehicle or premises, can only be done under the proper and valid authority of law. Is the act of examining something, often closely. Inspection under GST is a softer provision than search. It 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 operator of a warehouse or godown.

On the basis of results emerging from inspection or any other reason, the Joint Commissioner (or any officer of a higher rank) can order for a search, via written authorization, if he has reasons to believe that the following exist:

  • Goods which are liable for confiscation
  • Documents or Books or other things which will be useful during proceedings and are hidden somewhere

Based on his conclusions, the Joint Commissioner (or any officer of a higher rank) can, either on his own or through an authorized officer, follow the provisions of inspection and search under GST and seize the goods and documents. However care should be taken to record materials and relevant information, before the issue of the search warrant or before conducting the search.

Appellate Authority for Advance Ruling under GST


In our previous blog, we went through the provisions of advance ruling under GST. We also understood that the first level of appeal for advance ruling is to be made to the Authority for Advance Ruling (AAR). However, a taxable person who is not satisfied by the advance ruling of the AAR can approach the second level i.e. the Appellate Authority for Advance Ruling i.e. the AAAR.

It is a good time to note, that appealing against the advance ruling is a new provision in GST. The previous tax regime did not have any scope for appeal against Advance Ruling at all, and the only way to contest the ruling was by going through the Division Bench of the High Court. However, this process has been made easy by the introduction of an appeal mechanism to the Appellate Authority for Advance Ruling under GST – which we will understand in this blog.

Appellate Authority for Advance Ruling Process

The following are the various provisions laid down pertaining to the procedure for advance ruling by the Appellate Authority for Advance Ruling, under GST:

Initiation of Advance Ruling Procedure by AAAR

  • The initiation of the appeal to Appellate Authority for Advance Ruling can be made by the applicant or the officer who is aggrieved by any advance ruling
  • Appeal against the advance ruling of the AAR, must be made within 30 days from the date of the advance ruling issued by the AAR. However, this limit is extendable by 30 days.

Advance Ruling Forms by AAAR

  • The application for appealing against the advance ruling of the AAR, has to be made in Form GST ARA-02, along with the payment of fees of INR 10,000
  • If the appeal is made by a GST tax officer, then Form GST ARA-03 needs to be filed. However, no fees will be applicable in this case.

Advance Ruling Purview by AAAR

The AAAR can, by order, either confirm or modify the advance ruling issued by the AAR, which is appealed against. However, if the members of the AAAR, differ in opinion on any point, then an advance ruling cannot be issued.

Post the decision of the AAAR, a copy of the advance ruling signed by the members will be sent to the applicant, the prescribed or the jurisdictional CGST / SGST officer and to the initial authority that passed the Advance Ruling i.e. the AAR.

Advance Ruling Time Limit by AAAR

An advance ruling decision by the AAAR will be given within 90 days from the date of the application.

Rectification of the Advance Ruling by AAAR

The AAAR can amend its own order to rectify any apparent mistake, if the same is noticed within 6 months from the date of the original order. The rectification of the order can be done by:

  • AAAR on its own
  • Prescribed or the Jurisdictional CGST / SGCT officer
  • Applicant

However, it is to be noted that any rectification which may result in increase in tax liability or decrease in input tax credit, will be allowed only after giving a notice and an opportunity to be heard to the applicant.

Scope of the Advance Ruling by AAAR

The advance ruling decision by the Appellate Authority for Advance Ruling will be binding only on the following entities:

  • Applicant
  • Jurisdictional Tax Authorities in respect of the Applicant

However, if the law or the facts of the original advance ruling change, then the advance ruling issued by the AAAR will not apply.

Nullification of the Advance Ruling by AAAR

If it is discovered, that the appellant has obtained the advance ruling by fraud or suppression of material facts, then the Authority for Advance Ruling (AAR) or the Appellate Authority for Advance Ruling (AAAR) will declare the ruling to be void ab initio (from the beginning). All the provisions of GST, will then be applicable to the applicant as normal without any advance ruling – however, an opportunity of being heard will be given to the applicant, in such as case, post which advance ruling nullification may take place.

In conclusion, it can be said that the provisions of advance ruling under GST are bound to make life simpler for a taxable person who wants to gain clarity on the tax arrangements to be made for a particular transaction. However, the only area where currently a clarity is not available is – that there is no defined level of appeal beyond the 2nd level i.e. the Appellate Authority for Advance ruling. However, it may be expected that the process to appeal further should be similar to that in the previous tax system, and a taxable person who is not satisfied with the decision of the AAAR, may appeal against it, via a special dispensation to the Division Bench of the High Court.

27th GST Council Meeting Updates – Returns Simplified


On the 4th of May, 2018, the 27th GST Council meeting got underway, giving shape to the new returns filing model, which was awaited for the past several months. The new model was decided, based on the recommendations of the Group of Ministers, which had been constituted for the purpose of making the process a simplified one on the 17th of April, 2018. In addition the GST Council also did announce a few rate changes, and some structural changes in the shareholding pattern of the GSTN.Let’s go through all the major 27th GST Council meeting highlights:

27th GST Council meeting – Simplified returns

The 27th GST Council meeting introduced a simplified return filing process, major features of which are as follows:

One monthly return

All taxpayers, with a few exceptions, will have the facility to file one monthly returns, and the return filing dates will be determined in a staggered order, based on the turnover of the registered person. This has been primarily done to manage the load on the GST portal. Composition dealers and dealers with nil transactions will continue to file quarterly returns, as per the 27th GST Council meeting highlights.

Unidirectional flow of bills

There shall be a unidirectional flow of bills, i.e. bills may be uploaded by the seller anytime during the month, which will serve as valid documents to avail input tax credit for the buyer. The buyer too, will be able to see the uploaded invoices on a continuous basis, during a particular month. There will be no need to upload any purchase invoices as per the model suggested initially. Also, for all B2B transactions, HSN codes of 4 digits or more will need to be specified to achieve uniformity in the reporting system, as per the 27th GST Council highlights.

Simpler returns design

B2B dealers will need to fill invoice wise details of all outward supplies made by them, based on which the system will automatically calculate their tax liability. Similarly, their input tax credit will be calculated automatically by the system based on the invoices uploaded by their sellers. All this will be supported by a user-friendly interface coupled with an offline tool to upload invoices. Another major aspect of simplifying the returns process introduced by the 27th GST Council meeting was, the reduction in the content or the information required to be filled in the return forms. The details of the design of the return form, business processes and legal changes will be worked out by the appointed law committee based on these principles, as per the 27th GST Council updates.

No automatic reversal of ITC

There shall not be any automatic reversal of input tax credit from the buyer, in case the seller does not pay the tax, as was the case earlier. In case the seller defaults on the payment of tax, the recovery shall be made from the seller itself. However, as per the 27thGST Council recommendations, the option of reversal of ITC from the buyer shall also be an option available to the GST authorities, to address exceptional scenarios, such as, missing dealers, closure of business by the supplier, supplier not having adequate assets etc.

Online process for recovery and reversal

The recovery of tax or reversal of ITC shall be done through an online and automated process to reduce the human interface. The process will continue to follow the due course of issuing a notice and order, as per the updates from 27th GST Council meeting.

Supplier side control

In case a supplier has defaulted in payment of tax above a threshold amount, such a supplier will not be allowed to upload invoices and thus will not be allowed to avail any ITC. This has been introduced to avoid and to control misuse of the ITC facility. Similar safeguarding provisions have now been built in for newly registered dealers as well as per the 27th GST Council meeting updates. The GST Council has proposed setting up analytical tools to identify such transactions at the earliest, so that loss in revenue may be prevented.

Three stage transition

The following 3 stage transition to the new returns filing system was decided upon at the 27th GST Council meet:

  • Stage 1 – Present system of filing GSTR 3B and GSTR 1 returns. GSTR 2 and GSTR 3 will remain suspended. This will continue for a maximum of 6 months, by which the new return filing software will be ready.
  • Stage 2 – New return system will go live, with the facility for invoice – wise data upload and also facility for claiming ITC on a self-declaration basis, similar to the role of GSTR 3B currently. During this stage, the dealer will be constantly fed with information about the existing gap between ITC available, and provisional ITC being claimed.
  • Stage 3 – Provisional credit will get withdrawn totally, and ITC will be limited only to the invoices uploaded by the sellers from whom the dealer has purchased goods.

GST Rates discussed at the 27th GST Council meeting

While there were no GST rate changes announced as such at the 27th GST Council meeting, there was a good deal of discussion on the following two aspects:

  • Reduction of GST rates for digital transactions – Keeping in mind the need to move towards a less cash economy, the GST Council discussed a proposal to have a concession of 2% in the GST rate i.e. 1% each for CGST and SGST, for all B2C supplies in which payments are done via cheque or via digital mode. This was proposed in all cases where the overall GST rate is more than 3%, with a ceiling of INR 100 per transaction. The GST Council has recommended to set up a Group of Ministers from the State Governments to look into the proposal and make recommendations, before the next GST Council meeting, as suggested by the 27th GST Council meeting news.
  • Sugar Cess over and above 5% GST and reduction in GST rates of ethanol – Keeping in mind, the record production of sugar in the current sugar season, and the consequent reduction in sugar prices, the GST Council discussed imposing a sugar cess over and above the stipulated 5% GST rate and also considered reducing the GST rate on ethanol. The proposal has come from the food ministry, which has been mulling cutting down the GST rates on ethanol to help sugar mills clear dues worth INR 19,000 crore to sugarcane farmers. However, a conclusion could not be reached, and the GST Council finally recommended to set up a Group of Ministers from the State Governments to look into the proposal and make recommendations, within a period of 2 weeks, as per the 27th GST Council news.

GSTN changes finalised at the 27th GST Council meeting

The GSTN, as one may be aware, was created as a private limited, non-profit company, with an objective to provide shared IT infrastructure and services to Centre and State governments, tax payers and other stakeholders for the implementation of GST. Currently, the Central government and State governments are holding 24.5% equity shares respectively and the remaining 51% are held by 5 non-governmental institutions namely – HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Co and LIC Housing Finance Ltd. Majority of the GST processes including registration, return filing, tax payment, refunds processing are largely IT driven, and thus it was a given that the GSTN was handling large scale invoice level data of lakhs of business entities.

Considering the nature of the functions handled by GSTN, the GST Council felt that the GSTN should be converted into a fully owned government company.

Keeping this in mind, it was decided at the 27th GST Council meeting, that the 51% held by the non-governmental institutions, worth INR 5.1 Crore, was decided to be distributed equally among the Centre and the State governments, thus taking the respective share of both bodies to 50% each. It was also decided that the GSTN board will be allowed to retain the existing staff at the existing terms and conditions for a period of up to 5 years, and shall also have the flexibility to hire people through contract on the terms and conditions similar to those used by GSTN till now, while hiring regular employees. Nevertheless, the existing financial commitments given by the Centre and the States to GSTN to share the capital costs and O&M costs of the IT systems will continue as before.

In short, the 27th GST Council meeting was a major game changer, as far as the simplified return filing process is concerned. Given the various initiatives discussed, proposed and finalised at the meeting, life for the business is surely bound to become simpler as far as GST compliance is concerned.