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State GST Revenue Officers visits and subsequent Legal notices

Madhukar N Hiregange 
on 27 November 2018

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It has been observed that some State GST officers throughout India have started to visit the premises including to the Compliant Taxpayers. Many of them are mere fishing expeditions asking for various documents and finding fault. It is important to note that practice is not followed to that extent by the Central Government Officers. Surprisingly the State/ UT officers are making demands in Service Tax!! Not many may have much of an idea of the GST Act and Rules let alone tax on services. - There is an urgent need for guidance including the limitations to the Revenue Officers to ensure that GST eases business.[Relevant Sections could be 6(1), Rule 139/ 140, clarity on what constitutes reason to believe in minimum] - There is an urgent need to teach GST to the officers and also for those who are in adjudication, AAR authorities, Commissioners and JCs who have substantial powers. There should be a thorough course with regular FAQs in between and an exam in the end.

This examination is important as otherwise there is no incentive to read and understand. The Government is being very unfair when it expects the Trade to understand GST but the officers need not know. GST officer’s job is GST and it is not the trade primary function though they need to comply for sure. There is no advice available from any GST office (1 in 100 Maybe) as we understand in India even after 1 year and 3 months of GST being implemented.

Some of the provisions where the GST law is much more stringent than the earlier laws are:

1. The authorization by Commissioner has been diluted to the Joint Commissioners in GST. The JCs do not seem to be applying their mind and without reason to believe they may be giving the authorization,

2. Rule 140 need Security/ Bank Guarantee of 100% against 25% in Central Excise,

3. The pre-deposit even for a frivolous demand appealed is 30% Vs 20% in CE,

4. Undue protection to errant officers,

5. There is no notification under Section 6(1) for limiting the officers of the State/ Union Territory GST,

6. The provision for vexatious search under Sec 22 in CE does not find a place in GST and

7. The omission of collusion in demand provision- is this to protect the officers?

8. Officers do not know GST in general but are able to threaten and seize material/ books etc. GST was to reduce the interface between the officers and the trade and be non-intrusive as per the promises were given prior to the GST law coming into force. It has been observed that the visits of the State Revenue officers have increased lately in all parts of the country with more in Central and North India even to the tax compliant.

The jurisdictional officer u/s 6(1) is ONLY supposed to come as is reasonable. We find State officers visiting the assessee irrespective which maybe in contravention of s 6(2). Clarity needed from Govt. Knowledge is power and lack of knowledge can lead to unnecessary fear.

Therefore it is relevant to know the related GST provisions vis. Section 67 read with Rule 139.

1. The JC or above who has reason to believe that a premises is to be visited issue an authorisation in GST INS- 01 to a junior officer. Post facto authorization is not valid in law. Officer who say they will obtain in due course maybe politely asked to get and come.

2. The assessee should insist on this document to be produced and take a copy of the same. If not available then no entry to be provided. This action may avoid many unofficial visits. If not in format immediately thereafter email + RAPD of fact that the visit was not as per law should be sent.

3. The identity each of the officer maybe examined carefully and noted down. Their contact numbers and email IDs maybe requested.

4. If there is a visitors register for all who enter- then officers maybe requested ot enter. If they do not do so, this fact can be intimated later to the higher officer.

5. There are a number of decision in Income tax on this aspects which maybe relevant. However a mere difference in opinion of revenue, intimated stand of tax payer with reasons, visit based on FAQs or Circulars among many other may not be justified.

Some valid reasons could be:

a. Suppression of supply or part supply (part billing non billing, billing as exempt)

b. Suppression of value in case of supply to 3rd parties.

c. Fraudulently claimed transition credit

d. Claimed excess credit than admissible or availed credit on fake invoice or indulged in circular trading.

e. Any other action with intent to evade GST. Reason to believe does not cover reason to suspect or based on gossip or rumor.

6. 1000’s of Notices for difference between 3B and 1 had been sent in many States. After replies sent there is no action or only with the unwary/ those who do nto know the law- off record settlements are taking place. For those who gave considered replies- not even an acknowledgement!!

7. SCNs have started being directly issued based on the difference in GSTR 3B and GSTR-1!!- Notices under Section 35 read with Rule 56 for records. Totally against the due process set out.

8. Unprofessional behavior of visiting officer including threats of closing business/ arrest etc should be immediately communicated with the higher officer + Commissioner by mail as well as RPAD.

9. In case the premises in under CCTV the recording to be kept aside and that fatc also communicated to the revenue.

10. Any seizure of papers [ advisable not to give papers unofficially- which are promised to be returned- this can lead to untold avoidable hardship ] is to be in terms of order in GST INS- 02. This action may lead to postponing the visit itself until the time of genuine suspicion in case of roving enquiry.

11. The documents, files provided should be serially numbered ( including papers within) prior to handing over and proper acknowledgment taken at the time of seizure and not later on a subsequent visit to the GST office. This acknowledgment should be retained for being able to get back all documents. The assessee has the right to take copies of any of the documents sought to be seized in the presence of the officer in the normal course. This may take time but can be insisted on as once it is in the custody of the revenue getting copies is a nightmare and may not be possible which can lead to disruption of the business itself.

12. If nothing is seized it may be advisable that the entire sequence of the visit and questions asked and reasons and documents provided for seeing are noted and a letter on support for the enquiry sent to the visiting officer with copy to JC.

Final Suggestions:

A. Commissioner only authorized to authorize visits as was prevalent in Central Excise Law- India needs to go forward and not backward in such tax reform measures.

B. Surprisingly unlike the earlier law (Sec 22 of the CEA) there is no provision to penalize the errant officer ( who have been there is very large numbers especially in the State) for wrong doing or excesses.

C. Education of State officers urgently with examination especially for trade facing officers. This is a very important safeguard which needs to be there in the Act which seems to have been deliberately left out. In the absence of this the inspector raj may raise its hydra head. Trade and industry associations should highlight and insist for check and balances on officers to be available in the law and for the time being by way of Circulars/ executive instructions. In India being a democratic country only the authority prescribed by law can be exercised by the officers. [Article 265]

This short note is an attempt to arm the unwary, request governance in this law by CBIC and provide some protection for the compliant small and big taxpayers.

The author can also be reached at madhukar@hiregange.com


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