A visit by Goods and Services Tax officers to a taxpayer’s business premises is frequently described as a “raid”. That description may be legally incorrect.

The Central Goods and Services Tax Act, 2017, and the CGST Rules recognise several distinct situations in which officers may visit or enter a place of business. These include physical verification of registration particulars, departmental audit, access to records, inspection based on suspected tax evasion, search for concealed goods or evidence, and seizure of goods or documents.

BUY NOW : GST Searches: Case Laws In Favour And Against the Department

Each power has a different purpose, threshold, approving authority and consequence. A routine verification cannot automatically be converted into an unrestricted search, while a search cannot legally be conducted merely to determine whether some wrongdoing might possibly be discovered.

The distinction is important because the intensity of the power—and the safeguards available to the taxpayer—increases substantially as the department moves from verification to inspection, search and seizure.

GST Visits Exist on Different Legal Levels

These powers appear principally in Chapters XIII and XIV of the CGST Act, 2017.

1. Physical Verification of the Place of Business

Physical verification is primarily a registration safeguard. Its purpose is to confirm that the applicant or registered person actually operates from the address declared on the GST portal.

It is particularly relevant where an applicant has not undergone Aadhaar authentication, is selected through risk parameters or where the proper officer considers verification necessary under the registration rules.

Under Rule 9, an application may be subjected to physical verification before registration in specified circumstances. Rule 25 also permits physical verification after registration where the proper officer is satisfied that it is required.

The officer may ordinarily verify:

• Whether the business exists at the declared address;
• Whether the nature of activity corresponds with the registration application;
• Whether the principal and additional places of business are correctly declared;
• Whether the taxpayer’s name and GSTIN are displayed;
• The availability of basic business infrastructure;
• Relevant possession documents such as the rent agreement, ownership record, electricity bill or consent letter; and
• Whether the premises appear to be genuine or merely an address used to obtain registration.

The verification report, photographs and prescribed particulars are required to be uploaded in the prescribed registration form within the period specified under Rule 25.

A physical verification is not, by itself, an inspection or search under Section 67. The officer’s registration-verification authority does not automatically authorise rummaging through cupboards, taking away devices, sealing premises or seizing records.

If officers intend to exercise Section 67 powers, there must be separate statutory authority satisfying the conditions of that section.

2. Departmental Audit Under Section 65

An audit under Section 65 is a structured examination of a registered person’s GST compliance. It may be conducted at the taxpayer’s place of business or at the office of the tax authorities.

The taxpayer must ordinarily receive a notice in FORM GST ADT-01 at least 15 working days before the audit.

The audit may cover a financial year, part of a financial year or multiple financial years. The officers may verify:

• Turnover declared in returns and financial statements;
• Exemptions and deductions claimed;
• Classification and applicable GST rates;
• Time and place of supply;
• Input tax credit availed and utilised;
• Reversal of common or blocked credit;
• Refunds claimed;
• Reverse-charge liability;
• Reconciliation of GSTR-1, GSTR-3B and books;
• E-invoices and e-way bills;
• Stock and branch-transfer records; and
• Other issues relevant to GST compliance.

Rule 101 provides the operating framework for such audits. The officer may inform the taxpayer of discrepancies and consider the taxpayer’s explanation before finalising the findings. The findings are communicated in FORM GST ADT-02.

The audit is ordinarily required to be completed within three months from its commencement. The Commissioner may extend the period by up to six months for reasons recorded in writing.

Importantly, an audit finding is not itself a final tax demand. If the audit detects tax short-payment, erroneous refund or wrongful ITC, further proceedings must follow under the applicable demand provision—Section 73 or 74 for periods up to FY 2023-24 and Section 74A for FY 2024-25 onwards—unless the taxpayer makes payment in accordance with law.

3. Special Audit Under Section 66

A special audit is different from an ordinary departmental audit. It involves examination by a chartered accountant or cost accountant nominated by the Commissioner.

An officer not below the rank of Assistant Commissioner may direct a special audit, with the Commissioner’s prior approval, when the case involves complexity or where:

• The value has not been correctly declared; or
• The credit availed is outside the normal limits.

The direction is issued in FORM GST ADT-03.

A special audit can be ordered even if the taxpayer’s accounts have already been audited under another law. The nominated professional ordinarily has 90 days to submit the report, with a possible extension of another 90 days.

The expenses of the audit, including the professional’s remuneration, are determined and paid by the Commissioner. The registered person must be given an opportunity of hearing if material gathered during the special audit is proposed to be used in proceedings against them. The findings are communicated in FORM GST ADT-04.

4. Access to Business Premises Under Section 71

Section 71 creates a separate power of access. It allows an authorised GST officer to enter a registered person’s place of business to inspect records and systems necessary for:

• Audit;
• Scrutiny;
• Verification; and
• Checks considered necessary to safeguard revenue.

The officer must be authorised by a proper officer not below the rank of Joint Commissioner.

The provision permits access to:

• Books of account;
• Documents;
• Computers;
• Computer programs and software;
• Electronic records; and
• Other material available at the premises.

The taxpayer may also be required to make available trial balances, audited financial statements, cost-audit reports, income-tax audit reports and other relevant records. Such documents must ordinarily be produced within 15 working days of the demand, or within an extended period allowed by the officer.

“Access” is wider than a casual visit but is not identical to a search. It enables examination for identified statutory purposes. It does not dispense with the stricter requirements of Section 67 where officers intend to search concealed locations or seize goods and evidence.

5. Inspection Under Section 67(1)

Inspection is an investigative power activated by suspected tax evasion. It is more intrusive than verification, audit or access.

A proper officer not below the rank of Joint Commissioner must have reasons to believe that one of the circumstances specified in Section 67(1) exists. These include a belief that a taxable person has:

• Suppressed a transaction relating to a supply;
• Suppressed stock;
• Claimed ITC beyond entitlement;
• Contravened the Act or Rules to evade tax; or
• Used the premises, warehouse, godown or transport network to keep goods or accounts in a manner likely to facilitate evasion.

The Joint Commissioner-level officer may then issue written authorisation to another officer to inspect the relevant place of business. Rule 139 prescribes FORM GST INS-01 for authorisation.

“Reasons to believe” are not the same as suspicion, gossip or a desire to conduct a fishing inquiry. There must be relevant material giving rise to an objective belief. The belief must exist before the coercive action begins.

An inspection may cover not only the taxpayer’s principal place of business but also:

• Additional business premises;
• Warehouses and godowns;
• Transporters’ premises;
• Premises of logistics operators; and
• Other places where untaxed goods or incriminating accounts are believed to be kept.

6. Search Under Section 67(2)

A search is a more intrusive step than inspection. It is intended to locate goods or evidence believed to have been concealed or “secreted”.

A proper officer not below the rank of Joint Commissioner must have reasons to believe that:

• Goods liable to confiscation; or
• Documents, books or things useful or relevant to GST proceedings

are secreted at a particular place.

The officer may personally conduct the search or authorise another central tax officer in writing.

The words “secreted in any place” are important. Search authority cannot ordinarily be used as an open-ended mechanism to enter premises first and develop a justification later. The formation of belief and written authorisation must precede the search.

Where access is denied, Section 67(4) permits the authorised officer to seal or break open the door of the premises. The officer may also break open an almirah, box, receptacle or electronic device in which goods, accounts or documents are suspected to be concealed.

That power arises only during a lawfully authorised action. It does not mean that every visiting officer can force entry merely by showing an identity card.

7. Search Procedure and Panchnama

Section 67(10) applies the search-and-seizure safeguards under criminal procedure law, so far as applicable, subject to the GST-specific modification stated in the provision.

A properly conducted search should ordinarily involve:

• Verification of the officers’ identity;
• Production of written authorisation;
• Presence of independent witnesses;
• Preparation of a panchnama recording the proceedings;
• Identification of the premises searched;
• Recording of the date and time of commencement and conclusion;
• Preparation of an inventory of goods, documents and devices taken;
• Proper sealing and identification

Read More: 2 Income Tax Officials Arrested Over Alleged Fake Raid and ₹1 Crore Extortion Bid at Mumbai Businessman’s Office