PART – IV - ASSESSMENT

Contents

Assessment and Assessment Rules – Audit-Inspection, Search & Seizure -Arrest-Demand-

Recovery Proceeding – Other aspect demand and recovery – liability to pay in certain cases-
Advance Rulings & its Rules-Administration-Appeals – Offences and Penalties – Anti
Profiteering Measures and its Rules – E-Way Bill and its Rules – TDS-TCS
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Assessment and Assessment Rules:-

Sections- CGST Act,2017 Rules – CGST Rules,2017

59. Self-assessment 98. Provisional Assessment

60. Provisional assessment 99. Scrutiny of returns

61. Scrutiny of returns 100. Assessment in certain cases

62. Assessment of non-filers of returns

63. Assessment of unregistered persons

64. Summary assessment in certain special cases

In terms of section 2(11) of the Act, “assessment” means determination of tax liability under this Act
and includes self-assessment, re-assessment, provisional assessment, summary assessment and best
judgement assessment. It is important to note that there is no provision permitting a Proper Officer to
re-assess the tax liability of taxable person. The provisions of the law permit a registered person to
rectify any incorrect particulars furnished in the returns. In terms of section 39(9), if a registered person
discovers any omission or incorrect particulars furnished in a return, he is required to rectify such
omission or incorrect particulars in the return to be furnished for the tax period during which such
omission or incorrect particulars as are noticed (on payment of due interest), unless the same is as a
result of scrutiny, audit, inspection or enforcement activity by the tax authorities, or such rectification is
time barred (i.e., after the due date for furnishing of return for the month of September or second
quarter.

It is normally understood that an Assessment is conducted by a Proper Officer. In terms of section

2(91) of the CGST Act, 2017, a “Proper Officer” in relation to any function to be performed under this
Act, means the Commissioner or the officer of the central tax who is assigned that function by the
Commissioner.

The CGST Act contemplates the following types of Assessments:

• Self-assessment (Section 59)

• Provisional Assessment (Section 60)

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• Scrutiny of returns filed by registered taxable persons (Section 61)

• Assessment of non-filers of returns (Section 62)

• Assessment of unregistered persons (Section 63)

• Summary Assessment in certain special cases (Section 64)

(i) Self-assessment in terms of Section 59 refers to the assessment made by registered person himself /
itself while all other assessments are undertaken by tax authorities.

(ii) Provisional Assessment under Section 60 is an assessment undertaken at the instance of the
registered person. Provisional Assessment is followed by a final Assessment.

(iii) Scrutiny under section 61 is a form of re-assessment (since the self-assessment is made by the
registered person himself / itself). A scrutiny of returns conducted by the Proper Officer who checks for
the correctness of the returns filed and intimates the registered person of any discrepancies noticed.

(iv) Assessment of non-filers under section 62 and Assessment of un-registered person under section 63
are in the nature of ‘best judgement’ assessments.

(v) Summary Assessment under Section 64 is a form of protective assessment based on information
gathered from the tax authorities in a particular case.

Self-assessment (Section 59)

Self-assessment means an assessment by the registered person himself and not an assessment
conducted or carried out by the Proper Officer. The GST regime continues to promote the scheme of
self-assessment. Hence, every registered person would be required to assess his tax dues in accordance
with the provisions of GST Act and report the basis of calculation of tax dues to the tax administrators,
by filing periodic tax returns. Tax which is self-assessed consists of self-determination of (i) supply not
excluded by schedule III (ii) taxability of supply not covering alcohol, 5-petro product or securities (iii)
classification – goods or services (iv) exemption (v) liability on taxable person on forward charge and not
on recipient on reverse charge basis (vi) valuation with inclusions and exclusions (vii) admissibility of
input tax credit and (viii) determination of ‘net tax’ liability. This liability stands ‘disclosed’ in statement
filed under section 37 in Form GSTR-1 and liability disclosed is ‘discharge’ in returns filed under section
39 in Form GSTR-3B. Any assessment, even self-assessment, requires an assessment order. It has been
held in CCE v. Flock (India) Pvt. Ltd. 2000 (120) ELT 285 (SC) and in Priya Blue Industries Ltd. v. CC 2004
(172) ELT 145 (SC) that any lis must arise out of an order of assessment. In a self-assessment tax system,
the determination of liability may be carried out privately in the invoice issued under section 31. For this
reason, experts hold the view that the invoice (tax invoice or bill of supply) i s the self-determination
document prepared by the Registered Person in terms of the authority conferred by section 59. It is
important to note that ‘self-assessment’ does not confer authority of an assessing officer (called Proper
Officer) on the taxpayer. A taxpayer must exercise this liberty to assess tax liability voluntarily with the
perils of interest and penalty for any miscalculations or misinterpretations without usurping the role of
proper officer.
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Related provisions of the Statute

Section Rule Form

Self-Assessment by Regular Assessee and Casual Taxable 61 Form GSTR 3B

Person under section 39(1)

Self-Assessment by Composition Dealer under section 39(2) 62 Form GSTR 4

Self-Assessment by Non-Resident Taxable Person under 63 Form GSTR 5

section 39(5)

Self-Assessment of OIDARS provided by person located outside 64 Form GSTR 5A

India to non-taxable person in India under section 39(1)

Self-Assessment by ISD under section 39(4) 65 Form GSTR 6

Self-Assessment of Tax Deducted at Source under section 39(3) 66 Form GSTR 7

Self-Assessment of Tax Collected at Source under section 52(4) 67 Form GSTR 8

Self-Assessment for purpose of Refund by persons having UIN 82 Form GSTR 11

under section 39(1)

Provisional Assessment (Section 60)

Provisional assessment can be resorted to in the following situations:

(i) At the outside, “unable to determine” does not mean “difficult”. Inability due to unavailability of facts
relevant for determination of tax liability. For eg. if rate of tax was dependent on ‘percentage of copper
content’, then unless this fact (percentage of copper content) is determined by a laboratory, neither
taxpayer nor tax administration can arrive at the applicable rate of tax. This is just one example and
there are other s. Provisional assessment cannot be treated to be a substitute for Advance Ruling.

(ii) It would be abdication of self-assessment responsibility by taxpayers to ‘claim’ inability to determine

tax liability and remarkably place that responsibility before the proper officer. Except for facts, inability
to determine tax liability on account of interpretation of law does not come within the operation of
section 60.

The facility of provisional assessment is available only in the cases of valuation and determination of
rate of tax. The provisions of this section cannot be extended for any other purpose or subject matter.
For example, there may be uncertainty about the kind of tax (IGST or CGST-SGST) applicable, time of
supply, supplies to be treated as “supply of goods” or “supply of services”, determination of mixed or
composite supply is a rate dispute admissibility of ITC, quantum of reversal of ITC, whether a particular
action is supply or not. In the aforesaid kind or classes of cases, recourse is not available to provisional
assessment.
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(i) In terms of Rule 98(1), the process of provisional assessment commences on furnishing of an
application by the registered person along with the necessary supporting documents in FORM GST
ASMT-01, electronically through the common portal. The provisional assessment cannot be resorted to
by the Proper Officer on suo-motu basis.

(ii) The Proper Officer will thereafter issue a notice in FORM GST ASMT-02. As per ASMT2, reply is
required to be given within 15 days to the registered person and if required seek additional information
or documents. At this stage the proceedings are deemed to have commenced and the applicant is
required to file his objections / make submissions in FORM GST ASMT – 03. The registered person can
also appear in person and be heard provided he makes a specific request for a personal hearing.

(iii) On due consideration of the reply so filed, and after providing a reasonable opportunity of being
heard, the Proper Officer must issue an order in FORM GST ASMT – 04, by allowing payment of tax on
provisional basis, indicating the value or rate or both on the basis of which assessment is allowed on a
provisional basis The Proper Officer, in the normal course, cannot pass an order rejecting the application
of provisional assessment. Since section 60(1) employs the term ‘shall’ pass order ‘allowing’ payment of
tax provisionally. The word “shall” in this circumstance cannot be construed as “may”.

(iv) The order so passed should also indicate the amount for which bond has to be executed in Form GST
ASMT – 05 by the applicant. The security has to be furnished in the form of bank guarantee not
exceeding 25% of the bond ‘amount’ which shall include IGST, CGST, SGST or UTGST and cess (if any)
payable in respect of the transaction. A bond furnished to the Proper Officer under State Goods and
Services Tax Act or Integrated Goods and Services Tax Act shall be deemed to be a bond furnished under
the provisions of Central Goods and Services Tax Act and the rules made thereunder.

If the bond and security prescribed in ASMT-05 is not provided within the period specified in notice, the
provisional assessment permitted in ASMT-04 shall lapse.

Scrutiny of returns filed by registered taxable persons (Section 61)

Section 61 deals with the powers vested in the Proper Officer to scrutinize the returns filed by registered
persons with a view to verify the correctness of the return. In legal parlance, it is considered to be a pre-
adjudication process.

At the outset, it is important to recognize that email or text messages cannot be sent to taxpayers if a
query arises in the mind of the Proper Officer with respect to the returns filed. It has been noted that
such informal communication has been sent and even responded by taxpayers. Scrutiny of returns
requires the following ingredients:

➢ Returns – identify which is a ‘return’ in respect of which scrutiny is being carried out. Return is
defined in section 2(97) which does not refer to any specific section but states ‘any’ return ‘prescribed
or otherwise required to be furnished’. This requires careful consideration as there is room to gloss over
this important document. Any of the “GSTR” series of documents will be a ‘return’ to which scrutiny
provisions will apply. Experts are of the view that once GSTR 9 or 9A has been filed, no further scrutiny
of the underlying returns (say, GSTR 1/3B) can be taken up for scrutiny as the information may, as it was
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filed or altered and now reported in GSTR 9/9A. Scrutinizing documents that are no longer current (GSTR
1/3B) or already rectified in another return filed later in time (GSTR 9/9A) may be an exercise in futility;

➢ Proper Officer – only the Proper Officer under whose jurisdiction taxpayer is registered and filing
returns is authorized to scrutinize returns. Any cross-empowered officer may collect or access the
returns but is not vested with authority under section 61 to scrutinize. Such Officer may even scrutinize
but take action under other provisions and not under section 61. Reference may be had to the detailed
discussion regarding listing of jurisdiction and powers conferred under section 3 to 6 of CGST Act along
with relevant notifications and related circulars

➢ Discrepancy – is an inconsistency or inaccuracy which is a very important requirement to invoke

section 61 that the Proper Officer must ‘discover’ from within the returns itself. Section 61 does not
permit investigation into new things not emerging from the returns as there are other provisions with
checks and balances to undertake investigation. It is very clear provision ‘conferring jurisdiction’ by this
expression ‘discrepancy’. Discrepancy is not a doubt or confusion about what might have been the
transactions carried out by taxpayer. Discrepancy is a ‘lack of compatibility’ arising from within the
returns and not from any external source of additional information. Any inquiry without this jurisdiction
makes the entire proceedings void. Where a notice is issued under section 61, care must be taken to
identify whether the issue involved can pass must be of being a ‘discrepancy’. While self-assessment has
been stated NOT to be ‘unsupervised self-administration’ system, at the same time, self-assessment
does not empower wide-ranging assessment in the name of scrutiny. The scope is large but not
unlimited scope that Proper Officer is permitted to carry out in the name of scrutiny under section 61.
Responding to notice under section 61 does not amount to admission of wrongdoing.

➢ Resolution – taxpayer may take three routes (a) admission and rectification or explanation (b) non-
admission and (c) Admission but inaction by Taxpayer. Based on this, further steps to be taken by Proper
Officer are prescribed. Proper Officer cannot routinely call for books and records of taxpayer. Proper
Officer is welcome to then invoke sections 65 or 66 to audit the books of taxpayer, but those sections
have other prerequisites (which are discussed later). Carrying out inspection is not permissible without
prior permission from JC, there’s a special ingredient of ‘reason to believe’ to involve given in section 67
(discussed later). Most important aspect is that proper officer CANNOT carry out any assessment under
section 61. Care must be taken to object to any attempt at carrying out assessment where tax liability is
being determined on an apprehension based on the discrepancy. Discrepancy must conclude and be
resolved in one of the three ways listed in the section. There can be no ‘order of demand’ arising out of
section 61 itself. Yes, scrutiny can give rise to a show cause notice under section 73 or 74 which will be
adjudicated on its own merits but the proceedings under section 61 will conclude.

Assessment of non-filers of returns (Section 62)

This section commences with a non obstante clause, meaning whenever the provisions of section 73 or
74 applies the provisions of section 62 of the Act cannot be invoked. However, the provisions of section
62 can be invoked only in case of registered taxable persons who have failed to file returns, as required,
under section 39 or as the case may be, or final return on cancellation of registration under section 45 of
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the Act. Issuance of notice under section 46 operates as a pre-condition for initiating proceedings under
section 62 of the Act. However, section 62 cannot be invoked for non-filing of GSTR-1 or GSTR-9.

Non-compliance with the notice issued under section 46 paves the way for initiating the proceedings
under this section. So, a notice under section 46 is inescapable and compulsory for any action under
section 62 to be taken up. Please note that with the applicability of ‘service by email’ and ‘service on
portal’ are permitted in GST, it is imperative to look out for any such notice being sent to registered
email or posted on portal. If the assessee fails to furnish the return within 15 days of issue of notice
under section 46 then the proper officer may assess the tax liability in accordance with the provisions of
rule 100 i.e., to the best of his judgment, taking into account all the relevant material available on
record, and issue an assessment order. This is also known as ‘best judgment assessment’. It can be
completed without giving notice of hearing to the assessee. However, best judgment assessment should
be made on the basis of material available or material gathered by proper officer. Please note that only
returns under sections 39 and 45 are covered by section 62. Annual Returns filed under section 44
cannot be treated under section 62. Non-filing of Annual Returns will attract penalty and hence there
can be no ‘best judgement assessment’ on this basis. It is important to question any order under section
62 as to ‘how was jurisdiction acquired’ for such a proceeding. In other words, non-filing of GSTR 3 (or
GSTR 3B) and GSTR 10 (final return) will attract best judgement assessment. Failure to file GSTR 1 does
not attract section 62. Order under section 62 must be issued within a period of five years from the date
specified under section 44 for furnishing Annual Returns for the financial year to which the tax not paid
relates. Section 44(1) states that due date for furnishing the Annual Returns is on or before 31st
December following the end of financial year to which such Annual Returns pertains. However,
extension of the due date for furnishing the Annual Returns may be considered. Non-issuance of notice
under section 46 closes the door for invoking section 62 although other provisions are available to
recover the tax dues. If, however, a registered person furnishes a ‘valid return’ within 30 days of the
service of assessment order, the said assessment order shall be ‘deemed to be withdrawn’. ‘Valid
return’ is defined in section 2(117) to mean a return filed under section 39(1) of the Act on which self-
assessed tax has been paid in full. Valid return may not (or does not necessarily imply to) be perfect in
all respects and is, therefore, not barred from containing (inadvertent) errors. In other words, presence
of such errors does not render the return ‘defective’ and become non-existent in the eyes of law.
Erroneous return is also a valid return. Errors may be of omission or commission. Experts advise that
care must be taken to file such valid return free of errors and after order passed under section 62 being
vacated, proper officer would take up proceedings based on such valid returns under section 61.

‘Best judgement assessment’ must not be ‘worst’ judgement assessment, that is, the determination of
tax liability cannot be outlandish estimation of turnover based on some arbitrary growth rate oblivious
of the nature of business activities and prevalent market conditions. Some experts are of the view that
where turnover projection is made based on turnover of previous months, there is nothing in section 62
to indicate that corresponding credits, also on estimate basis, should not be included in arriving at
liability on ‘best’ judgement basis. Best judgement assessment must not be worst judgement and
determine high turnover ignoring seasonal downward variations and even benefit of estimate of credits
available on proportionate basis. There is nothing in the law to support view that ‘tax liability’ to be
determined on best judgement basis should be ‘gross liability’ and not ‘net tax liability’. For this reason,
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when outward supply that may not be existing, is being taxed on ‘best judgement’ basis with the
information that has become available, credit that is not claimed is not barred from being allowed in
arriving at ‘tax liability’. Instructions in Circular 129/48/2019- GST dated 24th Dec 2019 permits credit, at
least to the extent forthcoming from GSTR-2A must be allowed even though not claimed as required in
section 16(2)(d). As per the supra Circular, for the purpose of assessment of tax liability under section
62, the proper officer may take into account the details of outward supplies available in the statement
furnished under section 37 (FORM GSTR-1), details of supplies auto populated in FORM GSTR-2A,
information available from e-way bills, or any other information available from any other source,
including from inspection under section 71. Courts will have final say in the matter and when one has
failed to file returns, it is scarce that such a taxpayer can find favour of Courts in the manner of arriving
at best tax liability.

Assessment of unregistered persons (Section 63)

This section commences with a non obstante clause, meaning whenever the provisions of section 73 or
74 applies, the provisions of section 63 of the Act cannot be invoked. This Section is applicable to
unregistered persons i.e., persons who are liable to obtain registration under section 22 and have failed
to obtain registration, will come within scope of this section. This provision also covers cases where
registration was cancelled under section 29(2). Section 29(2) of the Act covers 5 instances where
registration may be cancelled by Proper Officer:

(a) A person who contravenes the provisions of this Act or Rules made thereunder; or

(b) A composition person who fails to furnish returns for 3 consecutive tax periods; or

(c) A person other than composition person who fails to furnish returns for 6 consecutive months or

(d) A person who has sought voluntary registration but has failed to commence business within 6
months; or

(e) Where registration has been obtained by way of fraud, willful misstatement or suppression of facts.

This is a remarkable provision where even when a taxable person is ‘unregistered’, proper office is
vested with jurisdiction to not only identify taxable transactions but also pass an ord er of assessment
on best judgement basis and fasten an enforceable demand. This section too begins with the phrase
“Notwithstanding anything to the contrary contained in section 73 or section 74”. It therefore permits
assessment under section 63 to be carried out independent of section 73 and section 74, however,
procedures contained in section 73 or 74 to the extent they are not inconsistent such as 73(5) or 74(5)
are to be followed while completing this assessment. As in the case of section 62, this section 63 too
contains a period of limitation of 5 years from due date applicable for filing Annual Returns for the
financial year to which unpaid tax relates. It is interesting to note the following ingredients for this
section 63 to be attracted:

➢ Taxable person – is the one in respect of whom this procedure may be adopted. As a result, all
ingredients to establish a person to constitute ‘taxable person’ as per section 2(107) must be satisfied. In
the absence of SCN, Proper Officer appears to come under great scrutiny for invoking this jurisdiction.
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All aspects that the proper officer admitted at the time of invoking these provisions will need to stand
scrutiny. But that would be the proceedings by way of response to the notice granting opportunity
under section 63 (not section 73 or 74) or in further appellate proceedings;

➢ Fails to obtain registration – is a positive act on the part of such taxable person. ‘Fail’ is not the same
as ‘omits’ to obtain registration. Clearly, being conscious of the requirement to obtain registration will
be required and as such come in for examination. While no ‘intent’ needs to be established for such
failure but clearly it cannot be supported merely on account of an inference about taxability or bona fide
view on nontaxability of a transaction or judicial interpretation;

➢ Registration cancelled but liable to pay tax – here, reference is provided to cancellation under
section 29(2). The entire section 29(2) is where ‘cancellation’ is done by proper officer. It is not taxable
person’s responsibility if Proper Officers decides to cancel registration (in the five circumstances listed)
and then proceeds to invoke jurisdiction under section 63 to pass a best judgement order. It is a wonder
that on one hand Proper Officer will cancel registration under section 29(2) and then proceed to fasten a
demand on taxable person by an assessment order under section 63 without issuing an SCN. Experts
view that the use of this section will come in for severe judicial scrutiny for failure to retain the
registration and issue SCN on all grounds that would afford taxable person to not only defend the
continuation of registration but also suspected tax liabilities. It would be appropriate for the proper
officer ‘suspend’ registration under rule 21-A (2) instead of cancelling the registration.

For assessment under this section, notice has to be issued as per rule 100(2) in FORM GST ASMT-14 +
DRC 1 by the Proper Officer. The notice would contain the reasons / grounds on which the assessment is
proposed to be made on best judgment basis. The registered person is allowed a time period of 15 days
to furnish his reply, if any. After considering the said explanation, the order has to be passed in FORM
GST ASMT- 15 + DRC 7. Special attention is to be paid to the appended forms in DRC-1 with the order
which contains the detailed grounds on which the said best judgement assessment would be passed and
then DRC 7 would accompany final demand (see rule 100(2) for details).

Summary Assessment in certain special cases (Section 64)

The word “summary assessment” is generally used in a tax legislation to denote ‘fast track assessment’
based on return filed by the assessee. It allows the Tax Officer to make prima facie adjustments based
on errors or factors based on the available information without an occasion for calling for further
information from an assessee or inspecting his records. In the GST Act, it is used to denote those
assessments which are completed ex-parte and on priority basis when there is reason to believe that
there will be loss of tax revenue, if such assessment is delayed. This provision is only the first step in
invoking the machinery provided to enforce recovery of dues from potential defaulters, and this
requires an assessment of the tax liability. Such amounts are commonly known as protective
assessments which in a sense protects Government revenue. This section pre-supposes the fact that the
proper officer must be in possession of sufficient grounds to believe that any delay will adversely affect
revenue.
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The summary assessment can be undertaken in case the following conditions are satisfied:

➢ The proper officer must have evidence that there may be a tax liability. It is this ingredient that
furnishes jurisdiction for the proper officer to invoke section 64. Experts hold the view that the
‘evidence’ is not merely ‘reason to believe’ but something more. And if it were merely reason to believe,
then that would not have been open for examination in further proceedings. Since it refers to something
more by the words ‘evidence’ that supports Proper Officer’s expectation of plausible tax liability, then
such evidentiary material can be called in for examination in further proceedings. Proper Officer’s
apprehension that there may be tax payable is not sufficient to vest with necessary jurisdiction; and

➢ The proper officer has obtained prior permission of Additional / Joint Commissioner to assess the tax
liability summarily. The Proper Officer must have sufficient ground to believe that any delay in passing
assessment order would result in loss of revenue. Now, steps proposed by the Proper Officer requires be
fettered with some checks. Checks on the exercise of this authority are ensured by permission from
ADC/JC who would appreciate the quality of such evidence and then grant permission. Once ADC/JC has
granted permission, proper officer may proceed to pass the assessment order. Examination of the
evidence after summary assessment order has been passed would only help in establishing impropriety
of the entire proceedings in judicial review.

Summary assessment under this section of the CGST Act can therefore be construed in some sense as a
‘protective assessment’ carried out in special circumstances, where there are sufficient grounds to
believe that taxable person will fail to make payment of any tax, penalty or interest, if the assessment is
not completed immediately. Such failure to pay tax, interest or penalty must be due to reasons
attributable to the taxpayer (ex: insolvency, instances of defaulting, absconding etc). Hence, summary
assessment under this Section is not a substitute for assessment that are nearing the time limitation
prescribed for issue of SCN. Further, mere possibility of non-payment cannot be a ground for resorting
to summary assessment, unless there are factors indicating that such non-payment pertains to admitted
or undisputed tax liability. As per the provision of rule 100(3), the summary assessment order should be
in FORM GST ASMT-16 + DRC 7. This section appears to overlap with section 62 and 63. However, please
note:

➢ Persons who have obtained registration but have failed to file returns will come within the operation
of section 62; and

➢ Persons who are liable to obtain registration but have failed to seek registration or whose
registration has been cancelled under section 29(2) will attract section 63. Section 64, however, requires
the ingredients discussed earlier to exist in order for summary assessment to be undertaken. Please
note that along with summary assessment order, a demand order in DRC-7 is also to be passed for
proceedings with recovery unless further appeal is filed under section 107 to stay the demand. The
section allows the person who is assessed and is served with the order so passed, to come forward and
make an application in accordance with rule 100(4) in FORM GST ASMT– 17 to the Additional / Joint
Commissioner, who will examine the same and if the Additional/ Joint Commissioner is satisfied, the
summary assessment order may be withdrawn. As regards the contents of this application, it may be
understood that the applicant may attempt to challenge the facts or reasons for the belief about risk of
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revenue loss and further accept to be available to respond, if proceedings under section 73/74 were to
be undertaken. Besides, the Additional / Joint Commissioner may, on his own motion, withdraw such
order and follow the procedure laid down in section 73 or as the case may be section 74 for
determination of taxes not paid or short paid or erroneously refunded or where input tax credit has
been wrongly availed or utilised if he considers that such order is erroneous. From the above, it appears
that every summary assessment order so withdrawn under subsection (2), may be followed by a notice
under section 73 or as the case may be section 74 of the Act. On receipt of application, the proper
officer has to pass the order of withdrawal or, rejection of the application in accordance with rule 100(5)
in FORM GST ASMT-18. Many times, summary assessments are undertaken in circumstances, when a
taxable person to whom liability pertains is not ascertainable. In such cases, the law provides that, if the
liability pertains to supply of goods, then person in charge of such goods shall be deemed to be the
taxable person liable to be assessed and pay tax and amount due on completion of summary
assessment. There is no deeming provision when unpaid tax liability relates to supply of services.

Audit:-

Audit by tax authorities ( Section – 65 )

This is probably for the first time in the history of an indirect tax statute that the term audit has been
defined. Audit means examination of records, returns and other documents maintained or furnished by
registered person. Hence, audit cannot be conducted in case of unregistered person even if he was
required to be registered. In the process of Audit records, returns and other documents to be examined,
may be maintained or furnished under this Act or Rules or any other law for the time being in force. In
audit, examination is done to verify the correctness of;

1. Turnover declared by the Supplier,

2. Taxes Paid by the Supplier,

3. Refund claimed by the Supplier

4. Input Tax credit availed by the Supplier, and

5. Classification of Goods or Service by the Supplier.

6. In audit, examination is also done to assess the compliance with the provisions of this Act or rules.

This chapter discusses about section 65 and section 66.

(a) Section 65 authorizes conduct of audit by the Commissioner or any other officer authorized by him of
the transactions of the registered persons only. The Commissioner may issue a general order or a
specific order, to authorize officers to conduct such audit. As per Rule 101(1), the period of audit under
sub-section (1) of section 65 shall be a financial year (or part thereof) or multiples thereof. The
frequency and manner for conducting such audit are yet to be prescribed. Normally, such issues could
have been dealt with by way of issue of Office orders or circular instructions. It is important to note that
the said order of Commissioner must be specific to the auditee and the tax period selected for audit.
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Absence, error and deficiency in such orders abort any preparatory step taken by the audit officer and
preparation to respond taken by the auditee. The audit will be conducted at the place of business of the
registered person or office of tax authorities. Intimation of audit is to be issued to the registered person
at least 15 working days in advance in accordance with rule 101(2) in Form GST ADT-01 and the audit is
to be completed within 3 months from the date of commencement of audit, which may be extended by
the Commissioner, where required, by a further period not exceeding 6 months.

(b) The Commissioner needs to record reasons in writing for grant of any such extension.

(c) During the course of audit, the authorized officer may require the registered person to afford him the
necessary facility to verify the books of account and also to furnis h the required information and render
assistance for timely completion of the audit.

(d) As per rule 101(4), Proper Officer may inform discrepancies noticed during audit to registered
person. Registered Person shall reply to discrepancies. Proper Officer shall finalize findings only after
due consideration of reply

(e) Some of the best practices to be adopted for GST audit among others could be:

The evaluation of the internal control vis-a-vis GST would indicate the area to be focused. This could be
done by verifying:

(a) The Statutory Audit report which has specific disclosure in regard to maintenance of record,
stock and fixed assets.

(b) The Information System Audit report and the internal audit report.

(c) Internal Control questionnaire designed for GST compliance.

(i) The use of generalised audit software to aid the GST audit would ensure modern
practice of risk-based audit are adopted.

(ii) The reconciliation of the books of account or reports from the ERP’s to the return is
imperative.

(iii) The review of the gross trial balance for detecting any incomes being set off with
expenses.

(iv) Review of purchases/expenses to examine applicability of reverse charge applicable

to goods/services. The foreign exchange outgo reconciliation would also be necessary for
identifying the liability of import of services.

(v) Quantitative reconciliation of stock transfer within the State or for supplies to job
workers under exemption.

(vi) Ratio analysis could provide vital clues on areas of non-compliance

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(f) On audit completion, information is required to be provided to the registered person including the
findings during the audit as per section 65(6) read with rule 101(5) in FORM GST ADT-02 within thirty
days. In cases where tax liability is identified during the audit or input tax credit wrongly availed or
utilized by the auditee, proper officer may initiate action under Section 73 or 74. Audit cannot conclude
automatically resulting in a demand. Independent application of mind is necessary for a valid demand to
be raised.

(g) It is important to identify that audit under section 65 can commence in a routine manner although
100 per cent audit of given taxpayer or all taxpayers in same industry would not be feasible. Unlike
scope and limits to powers under section 61 to 64, scope and coverage under section 65 can extend
from scrutiny all the way to investigation. New discoveries may be made but cannot make ‘spot
recovery’. Show cause notice under section 73 or 74 or 76 is a must for any demand to be entertained
by taxpayer.

Special Audit ( Section -66 ):-

Availing the services of experts is an age-old practice and a due process of law. These experts have done
yeoman service to the process of delivering justice. One such facility extended by the Act is in section 66
where an officer not below the rank of an Assistant Commissioner, duly approved, may avail the services
of a Chartered Accountant or Cost Accountant to conduct a detailed examination of specific areas of
operations of a registered person. Similar provisions exist under the Income Tax Law as well.

(a) Availing the services of the expert be it a Chartered Accountant or Cost Accountant is permitted by
this section only when the officer (considering the nature & complexity of the business and in the
interest of revenue) is of the opinion that:

⎯ Value has not been correctly declared; or

⎯ Credit availed is not within the normal limits.

It would be interesting to know how these ‘subjective’ conclusions will be drawn and how the proper
officers determine what is the normal limit of input credit availed.

(b) An Assistant Commissioner who nurses an opinion on the above two aspects, after commencement
and before completion of any scrutiny, enquiry, investigation or any other proceedings under the Act,
may direct a registered person to get his books of accounts audited by an expert. Such direction is to be
issued in accordance with the provision of Rule 102(1) in FORM GST ADT-03

(c) The Assistant Commissioner needs to obtain prior permission of the Commissioner to issue such
direction to the taxable person

(d) Identifying that the expert is not left to be appointed by the registered person whose audit is to be
conducted but the expert is to be nominated by the Commissioner.
 ---13---

(e) The Chartered Accountant or the Cost Accountant so appointed shall submit the audit report,
mentioning the specified particulars therein, within a period of 90 days, to the Assistant Commissioner
in accordance with provision of Rule 102(2) FORM GST ADT-04.

(f) In the event of an application to the Assistant Commissioner by Chartered Accountant or the Cost
Accountant or the registered person seeking an extension, or for any material or sufficient reason, the
due date of submission of audit report may be extended by another 90 days.

(g) Section 66(3) states that special audit may be initiated notwithstanding that the accounts of the
registered person have been audited under any other provisions of this Act or any other law for the time
being in force. While the report in respect of the special audit under this section is to be submitted
directly to the Assistant Commissioner, the registered person is to be provided an opportunity of being
heard in respect of any material gathered in the special audit which is proposed to be used in any
proceedings under this Act. This provision does not appear to clearly state whether the registered
person is entitled to receive a copy of the entire audit report or only extracts or merely inferences from
the audit. However, the observance of the principles of natural justice in the proceedings arising from
this audit would not fail the taxable person on this aspect.

(h) The remuneration to the expert is to be determined and paid by the Commissioner whose decision
will be final.

(i) As in the case of audit under section 65, no demand of tax, even ad interim, is permitted on
completion of the special audit under this section. In case any possible tax liability is identified during
the audit, procedure under section 73 or 74 as the case may be is to be followed.

Power of inspection, search and seizure:- ( Section – 67 ):-

Inspection: A proper officer not below the rank of Joint Commissioner, may issue an authorisation (in
form GST INS-01) to any other sub-ordinate officer to carry out an inspection of any places of
business, if such proper officer ‘has reasons to believe’ that:

(a) the taxable person:

(i) has suppressed any transaction of supply of goods or services or both; or

(ii) has suppressed information relating to stock in hand; or

(iii) has claimed input tax credit in excess of his entitlement; or

(iv) has contravened any of the provisions of the GST law, with an intent to evade taxes;

(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse
or a godown or any other place:

(i) is keeping goods which have escaped payment of tax; or

(ii) has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable
under the GST law
 ---14---

Search and seizure: A proper officer not below the rank of Joint Commissioner, may issue an
authorisation (in form GST INS-01) to any other officer subordinate to him (or himself) to
search and seize any goods / documents / books / things2 which in his opinion would be
useful for / relevant to proceedings under the GST Law, when he has reason to believe that
any goods liable to confiscation are secreted in any place.

Important points to note in respect of search and seizure:

(a) The order of seizure shall be made in form GST INS-02.

(b) The owner or custodian of the goods may be entrusted upon the custody of such goods or
things for safe upkeep.

(c) Where it is not practicable to seize such goods, an order of prohibition (In form GST INS-03)
may be served on the person / custodian of the goods that he shall not remove, part with, or
otherwise deal with the goods except with the previous permission of the officer.

(d) Seizure of the accounts, registers or documents produced before proper officer- If proper
officer has reasons to believe that any person has evaded or is attempting to evade the taxes,
the officer may seize the accounts, registers or documents of the said person produced before
him on recording the reasons in writing and granting a receipt of such seizure to such person.
In this regard, it may be noted that the seized accounts / registers / documents can be
retained for any period in respect of any proceedings for prosecution.

The following are important to note in respect of goods or documents or books or things which
have been seized by the officer:

(a) Retention: The said officer:

(i) shall retain the documents or books or things so seized so long as may be necessary for their
examination and for any inquiry or proceedings under this Act i.e., relied upon documents (RUD)

(ii) However, shall return the documents, books or things seized or produced by a taxable or any
other person on which no reliance has been placed for issuing notice, within a period of 30 days
from the date of issue of notice.

(b) Power to Seal/Break upon (where access is denied): If the officer authorised to conduct
search and seizure is denied access to any premises, almirah, electronic devices, box, receptacle
in which any goods, accounts, registers or documents of the person are suspected to be
concealed, then he shall have the power to:

▪ seal or break open the door of any premises; or

▪ break open any almirah, electronic devices, box, receptacle

 ---15---

(c) Inventory of seized goods etc.-The officer seizing the goods, documents, books or things shall
prepare an inventory of such items containing, inter alia, description, quantity or unit, make,
mark or model, where applicable, and get it signed by the person from whom such goods or
documents or books or things are seized.

(d) Copies or extract of seized documents:

(a) The person from whose custody, documents are seized is entitled to:

(i) make copies or

(ii) take extract of such documents in the presence of an authorized officer at

such place and time as may be indicated by such officer.

(b) However, copies or extracts may be denied if the officer believes that such an act
will prejudicially affect the investigation.

(e) Provisional release of Seized Goods: The goods so seized shall be released on a provisional
basis, upon:

(a) execution of Bond in Form GST INS -04 for the value of the goods and

(b) furnishing of security in the form of Bank Guarantee equal to the amount of
applicable tax (incl. SGST / UTGST / IGST / Cess) + interest + penalty

or on payment of applicable tax, interest and penalty payable, as the case may be.

Once the goods are provisionally released and where the person fails to produce the
goods at the appointed date and place indicated by the proper officer, the security shall
be encashed and adjusted against the liabilities in respect of such goods. An important
point to note here is that provisional release of goods has to be mandatorily taken by
the concerned person within one month of executing the bond. In case of failure to do
so, the proper officer has the power to dispose of f the said goods as per Notification
No. 27/2018-Central Tax dated 13.06.2018 [Sl. No. 17 of the Schedule appended to such
notification]

(f) Release of perishable or hazardous goods or things: Where the goods or things seized are of
perishable or hazardous nature, and if the taxable person:

• pays an amount equivalent to the market price of such goods or things; or

• the amount of tax, interest and penalty that is or may become payable by the taxable person,
whichever is lower, such goods or things shall be released forthwith, by an order in FORM GST
INS-05, on proof of payment. Where the taxable person fails to pay the above amount, the 3
[proper officer] may dispose of such goods or things and the amount realized thereby shall be
adjusted against the tax, interest, penalty, or any other amount payable in respect of such goods
or things.
 ---16---

(g) Return of Seized Goods:If no notice has been issued within 6 months (or an extended period
of another 6 months by the proper officer, on the basis of sufficient grounds), the seized
goods/exhibits ought to be returned to the person from whom the goods were seized.

(i) Applicability of Code of Criminal Procedure, 1973: The provisions of Code of Criminal
Procedure, 1973 relating to search and seizure shall be applicable to the GST Laws and in
section 165(5) of the code of criminal procedure, the word ‘Magistrate’ should be read as
‘Commissioner’.

(j) Surprise Check: The Commissioner or an officer authorized by him can further authorize any
other person to purchase any goods and / or services from the business premises of any taxable
person in order to check the manner of issuance of tax invoices / bills of supply and the taxable
person or any person in charge of the business premises shall: (a) refund the tax paid thereon
when the goods so purchased are returned (no time limit prescribed in this regard) after
cancelling the tax invoice or any bills of supply issued earlier in this regard.

Power to arrest ( Section – 69 ):-

The Commissioner is vested with the power to authorise, by an order, any Officer of the central
tax to arrest a person, where he has reasons to believe that such person has fulfilled the
conditions as specified in section 132 (1) and (2):

A. Offence under Section 132:

(1) [Whoever commits, or causes to commit and retain the benefits arising out of, any of the
following offences], namely:-

(a) Supplies any goods or services or both without issue of any invoice, in violation of
the provisions of this Act or the rules made thereunder, with the intention to evade
tax;

(b) Issues any invoice or bill without supply of goods or services or both in violation of
the provisions of this Act, or the rules made thereunder leading to wrongful availment
or utilisation of input tax credit or refund of tax;

(c) [Avails input tax credit using the invoice or bill referred to in clause (b) or
fraudulently avails input tax credit without any invoice or bill]

(d) Collects any amount as tax but fails to pay the same to the Government beyond a
period of three months from the date on which such payment becomes due.
 ---17---

B. Punishment under Section 132(1)(i) or (ii) or section 132(2) as follows:

Under section 132(1) – In cases where the amount of tax evaded or the amount of input tax
credit wrongly availed or utilised or the amount of refund wrongly taken:

— Exceeds Rs. 500 Lakhs: the offender shall be punishable with imprisonment for a
term which may extend to 5 years alongwith fine - section 132(1)(i); or

— Exceeds Rs 250 Lakhs but does not exceed Rs 500 Lakhs: the offender shall be
punishable with imprisonment for a term which may extend to 3 years alongwith fine
- section 132(1)(ii); OR

Under section 132(2) – where any person convicted under section 132 is again convicted, then
the offender shall be punishable with imprisonment for a term which may extend to 5 years
alongwith fine for every subsequent conviction.

If an offence involves an amount exceeding Rs. 500 lakhs and as such punishable for a term
which may extend to 5 years along with fine under section 132(1)(i), then such an offence
shall be cognizable and non-bailable under section 132(5). The officer arresting such person is
required to inform him of the grounds of arrest and produce him before the Magistrate within
24 hours. All other offences under GST law shall be non-cognizable and bailable under section
132(4). In case of such offences, subject to the provisions of the Code of Criminal Procedure,
1973, the arrested person shall be admitted to bail or in default of bail, forwarded to the
custody of the Magistrate. The Assistant/Deputy Commissioner can grant the bail and is
conferred powers of an officer-in-charge of a police station.

All arrests should be made as per the provisions of Code of Criminal Procedure, 1973. Please
note that relief of section 24 to 30 of Evidence Act may be availed in respect of statements
made by the accused.

Recently, the Apex Court in the case of Siddharth vs State of UP [2022 (64) GSTL 34 (SC)]
observed as below:

• “We may note that personal liberty is an important aspect of our constitutional mandate.

• The occasion to arrest an accused during investigation arises when custodial investigation
becomes necessary or it is a heinous crime or where there is a possibility of influencing the
witnesses or accused may abscond.

• Merely because an arrest can be made because it is lawful does not mandate that arrest must
be made. A distinction must be made between the existence of the power to arrest and the
justification for exercise of it. [Joginder Kumar v. State of U.P. & Ors. - (1994) 4 SCC 260].

• If arrest is made routine, it can cause incalculable harm to the reputation and self-esteem of a
person. If the Investigating Officer has no reason to believe that the accused will abscond or
 ---18---

disobey summons and has, in fact, throughout co-operated with the investigation we fail to
appreciate why there should be a compulsion on the officer to arrest the accused.”

CBIC vide Instruction No. 02/2022-23 [GST-Investigation] dated 17.08.2022, issued guidelines for
arrest and bail in relation to offences punishable under the CGST Act, 2017. The same is
reproduced as follows:

Hon'ble Supreme Court of India in its judgment, dated 16th August, 2021 in Criminal Appeal No.
838 of 2021, arising out of SLP (Crl.) No. 5442/2021, has observed as follows: "We may note that
personal liberty is an important aspect of our constitutional mandate. The occasion to arrest an
accused during investigation arises when custodial investigation becomes necessary or it is a
heinous crime or where there is a possibility of influencing the witnesses or accused may
abscond. Merely because an arrest can be made because it is lawful does not mandate that
arrest must be made. A distinction must be made between the existence of the power to arrest
and the justification for exercise of it. If arrest is made routine, it can cause incalculable harm to
the reputation and selfesteem of a person. If the Investigating Officer has no reason to believe
that the accused will abscond or disobey summons and has, in fact, throughout co-operated
with the investigation we fail to appreciate why there should be a compulsion on the officer to
arrest the accused."

2. Board has examined the above mentioned judgment and has felt the need to issue guidelines
with respect to arrest under CGST Act, 2017. Even, under legacy laws i.e. Central Excise Act,
1944 (1 of 1944) and Chapter V of the Finance Act, 1994 (32 of 1994), the instructions regarding
exercise of power to arrest had been issued.

3. Conditions precedent to arrest:

3.1 Sub-section (1) of Section 132 of CGST Act, 2017 deals with the punishment for offences
specified therein. Sub-section (1) of Section 69 gives the power to the Commissioner to arrest a
person where he has reason to believe that the alleged offender has committed any offence
specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of Section 132
which is punishable under clause (i) or clause (ii) of subsection (1), or sub-section (2) of the
Section 132 of CGST Act, 2017. Therefore, before placing a person under arrest, the legal
requirements must be fulfilled. The reasons to believe to arrive at a decision to place an alleged
offender under arrest must be unambiguous and amply clear. The reasons to believe must be
based on credible material.

3.2 Since arrest impinges on the personal liberty of an individual, the power to arrest must be
exercised carefully. The arrest should not be made in routine and mechanical manner. Even if all
the legal conditions precedent to arrest mentioned in Section 132 of the CGST Act, 2017 are
fulfilled, that will not, ipso facto, mean that an arrest must be made. Once the legal ingredients
of the offence are made out, the Commissioner or the competent authority must then
determine if the answer to any or some of the following questions is in the affirmative:
 ---19---

3.2.1 Whether the person was concerned in the non-bailable offence or credible
information has been received, or a reasonable suspicion exists, of his having been so
concerned?

3.2.2 Whether arrest is necessary to ensure proper investigation of the offence?

3.2.3 Whether the person, if not restricted, is likely to tamper the course of further
investigation or is likely to tamper with evidence or intimidate or influence witnesses?

3.2.4 Whether person is mastermind or key operator effecting proxy/benami

transaction in the name of dummy GSTIN or non-existent persons, etc. for passing
fraudulent input tax credit etc.?

3.2.5 As unless such person is arrested, his presence before investigating officer cannot
be ensured.

3.3 Approval to arrest should be granted only where the intent to evade tax or commit acts
leading to availment or utilization of wrongful Input Tax Credit or fraudulent refund of tax or
failure to pay amount collected as tax as specified in sub-section (1) of Section 132 of the CGST
Act 2017, is evident and element of mens rea/guilty mind is palpable.

3.4 Thus, the relevant factors before deciding to arrest a person, apart from fulfillment of the
legal requirements, must be that the need to ensure proper investigation and prevent the
possibility of tampering with evidence or intimidating or influencing witnesses exists.

3.5 Arrest should, however, not be resorted to in cases of technical nature i.e. where the
demand of tax is based on a difference of opinion regarding interpretation of Law. The prevalent
practice of assessment could also be one of the determining factors while ascribing intention to
evade tax to the alleged offender. Other factors influencing the decision to arrest could be if the
alleged offender is co-operating in the investigation, viz. compliance to summons, furnishing of
documents called for, not giving evasive replies, voluntary payment of tax etc.

4. Procedure for arrest

4.1 Pr. Commissioner/Commissioner shall record on file that after considering the nature of
offence, the role of person involved and evidence available, he has reason to believe that the
person has committed an offence as mentioned in Section 132 and may authorize an officer of
central tax to arrest the concerned person(s). The provisions of the Code of Criminal Procedure,
1973 (2 of 1974), read with section 69(3) of CGST Act relating to arrest and the procedure
thereof, must be adhered to. It is, therefore, advised that the Pr. Commissioner/Commissioner
should ensure that all officers are fully familiar with the provisions of the Code of Criminal
Procedure, 1973 (2 of 1974).

4.2 The arrest memo must be in compliance with the directions of Hon'ble Supreme Court in the
case of D.K Basu vs State of West Bengal reported in 1997(1) SCC 416 (see paragraph 35).
Format of arrest memo has been prescribed under Board's Circular No. 128/47/2019- GST,
 ---20---

dated 23rd December, 2019. The arrest memo should indicate relevant section (s) of the CGST
Act, 2017 or other laws attracted to the case and to the arrested person and inapplicable
provisions should be struck off. In addition,

4.2.1 The grounds of arrest must be explained to the arrested person and this fact must
be noted in the arrest memo;

4.2.2 A nominated or authorized person (as per the details provided by arrested
person) of the arrested person should be informed immediately and this fact shall be
mentioned in the arrest memo;

4.2.3 The date and time of arrest shall be mentioned in the arrest memo and the arrest
memo should be given to the person arrested under proper acknowledgment.

4.3 A separate arrest memo has to be made and provided to each individual/arrested person.
This should particularly be kept in mind in the event when there are several arrests in a single
case.

4.4 Attention is also invited to Board's Circular No. 122/41/2019-GST, dated 5th November,
2019 which makes generation and quoting of Document Identification Number (DIN) mandatory
on communication issued by officers of CBIC to tax payers and other concerned persons for the
purpose of investigation. Any lapse in this regard will be viewed seriously.

4.5 Further there are certain modalities which should be complied with at the time of arrest and
pursuant to an arrest, which include the following:

4.5.1 A woman should be arrested only by a woman officer in accordance with section
46 of Code of Criminal Procedure, 1973.

4.5.2 Medical examination of an arrested person should be conducted by a medical

officer in the service of Central or State Government and in case the medical officer is
not available, by a registered medical practitioner, soon after the arrest is made. If an
arrested person is a female, then such an examination shall be made only by or under
supervision of a female medical officer, and in case the female medical officer is not
available, by a female registered medical practitioner.

4.5.3 It shall be the duty of the person having the custody of an arrested person to take
reasonable care of the health and safety of the arrested person.

4.5.4 Arrest should be made with minimal use of force and publicity, and without
violence. The person arrested should be subjected to reasonable restraint to prevent
escape
 ---21---

5. Post arrest formalities

5.1 The procedure is separately outlined for the different categories of offences, as listed in sub-
sections (4) and (5) of Section 132 of the CGST Act, 2017, as amended:

5.1.1.1In cases, where a person is arrested under sub-section (1) of Section 69 of the
CGST Act, 2017, for an offence specified under sub-section (4) of Section 132 of the
CGST Act, 2017, the Assistant Commissioner or Deputy Commissioner is bound to
release a person on bail against a bail bond. The bail conditions should be informed in
writing to the arrested person and also on telephone to the nominated person of the
person (s) arrested. The arrested person should also be allowed to talk to the
nominated person.

5.1.1.2 The conditions will relate to, inter alia, execution of a personal bail bond and one
surety of like amount given by a local person of repute, appearance before the
investigating officer when required and not leaving the country without informing the
officer. The amount to be indicated in the personal bail bond and surety will depend
upon the facts and circumstances of each case, inter-alia, on the amount of tax involved.
It has to be ensured that the amount of Bail bond /Surety should not be excessive and
should be commensurate with the financial status of the arrested person.

5.1.1.3 If the conditions of the bail are fulfilled by the arrested person, he shall be
released by the officer concerned on bail forthwith. However, only in cases where the
conditions for granting bail are not fulfilled, the arrested person shall be produced
before the appropriate Magistrate without unnecessary delay and within twenty-four
hours of arrest. If necessary, the arrested person may be handed over1 to the nearest
police station for his safe custody, during the night under a challan, before he is
produced before the Court.

5.1.2 In cases, where a person is arrested under sub-section (1) of Section 69 of the
CGST Act, 2017, for an offence specified under sub-section (5) of Section 132 of the
CGST Act, 2017, the officer authorized to arrest the person shall inform such person of
the grounds of arrest and produce him before a Magistrate within twentyfour hours.
However, in the event of circumstances preventing the production of the arrested
person before a Magistrate, if necessary, the arrested person may be handed over to
nearest Police Station for his safe custody under a proper challan and produced before
the Magistrate on the next day, and the nominated person of the arrested person may
also be informed accordingly. In any case, it must be ensured that the arrested person
should be produced before the appropriate Magistrate within twenty four hours of
arrest, exclusive of the time necessary for the journey from the place of arrest to the
Magistrate's Court.
 ---22---

5.2 Formats of the relevant documentation i.e. Bail Bond in the Code of Criminal Procedure,
1973 (2 of 1974) and the Challan for handing over to the police should be followed.

5.3 After arrest of the accused, efforts should be made to file prosecution complaint under
Section 132 of the Act, before the competent court at the earliest, preferably within sixty days
of arrest, where no bail is granted. In all other cases of arrest also, prosecution complaint should
be filed within a definite time frame.

5.4 Every Commissionerate/Directorate should maintain a Bail Register containing the details of
the case, arrested person, bail amount, surety amount etc. The money/Instruments/ documents
received as surety should be kept in safe custody of a single nominated officer who shall ensure
that these instruments/ documents received as surety are kept valid till the bail is discharged.

6. Reports to be sent

6.1 Pr. Director-General (DGGI)/ Pr. Chief Commissioner(s)/Chief Commissioner(s) shall

send a report on every arrest to Member (Compliance Management) as well as to the
Zonal Member within 24 hours of the arrest giving details as has been prescribed in
AnnexureI. To maintain an all India record of arrests made in CGST, from September,
2022 onwards, a monthly report of all persons arrested in the Zone shall be sent by the
Principal Chief Commissioner(s)/Chief Commissioner(s) to the Directorate General of
GST Intelligence, Headquarters, New Delhi in the format, hereby prescribed in
Annexure-II, by the 5th of the succeeding month. The monthly reports received from the
formations shall be compiled by DGGI, Hqrs. and a compiled Zone wise report shall be
sent to Commissioner (GST Investigation), CBIC by 10th of every month.

6.2 Further, all such reports shall be sent only by e-mail and the practice of sending hard
copies to the Board should be stopped with immediate effect.

7. The field formations are hereby directed to circulate these guidelines/instructions to all the
formations under their charge for strict compliance. Difficulties, if any, in implementation of the
aforesaid guidelines/instructions may be brought to the notice of the Board.

8. Receipt of this Instruction may please be acknowledged.

Demands and Recovery:- ---23---

Sections Rules

73. Determination of tax not paid or short paid or 142. Notice and order for demand of amounts payable
erroneously refunded or input tax credit wrongly under the Act 142A. Procedure for recovery of dues
availed or utilised for any reason other than fraud or under existing laws
any wilful misstatement or suppression of facts
143. Recovery by deduction from any money owed
74. Determination of tax not paid or short paid or
erroneously refunded or input tax credit wrongly 144. Recovery by sale of goods under the control of
availed or utilised by reason of fraud or any wilful proper officer
misstatement or suppression of facts
145. Recovery from a third person
75. General provisions relating to determination of tax
146. Recovery through execution of a decree, etc.
76. Tax collected but not paid to Government
147. Recovery by sale of movable or immovable
77. Tax wrongfully collected and paid to Central property
Government or State Government
148. Prohibition against bidding or purchase by officer
78. Initiation of recovery proceedings
149. Prohibition against sale on holidays
79. Recovery of tax
150. Assistance by police
80. Payment of tax and other amount in instalments
151. Attachment of debts and shares, etc.
81. Transfer of property to be void in certain cases
152. Attachment of property in custody of courts or
82. Tax to be first charge on property Public Officer

83. Provisional attachment to protect revenue in 153. Attachment of interest in partnership

certain cases
154. Disposal of proceeds of sale of goods and movable
84. Continuation and validation of certain recovery or immovable property
proceedings
155. Recovery through land revenue authority

156. Recovery through court

157. Recovery from surety

158. Payment of tax and other amounts in instalments

158A. Consent based sharing of information furnished

by taxable person

159. Provisional attachment of property

160. Recovery from company in liquidation

161. Continuation of certain recovery proceedings

 ---24---

Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly
availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts.
( Section – 73 ):-

Section 73 deals with determination of tax and its demand under certain circumstances such as:
• Tax not paid; or
• Tax short paid; or
• Input tax credit wrongly availed; or
• Input tax credit wrongly utilized; or
• Tax erroneously refunded

This section specifically covers determination of such taxes under circumstances of cases not involving
fraud, wilful misstatement or suppression of facts;

Section 73 also applies for demand of interest payable which is not paid or partly paid or interest
erroneously refunded. Here, tax authorities would issue notice under section 73 and (i) demand tax
applicable on the transaction along with interest and applicable penalty (ii) record the fact of payment
discharged only to the extent of tax due (iii) appropriate the tax already deposited and (iv) require
payment of outstanding interest and applicable penalty. Issuing a notice is an essential requirement to
demand any payment (tax or interest or penalty) while adhering to principles of natural justice.

Section 73 makes it abundantly clear that in GST there is no such thing called “SPOT recovery” as was
practiced under earlier tax regime. There is no question of any determination of liability bypassing
section 73. And there is no question of taxpayer accepting such determination without a valid notice and
the attendant safeguards provided in section 75 (discussed later). The provisions of section 73 can be
invoked where it appears to the Proper Officer that a situation involving payment of tax (stated in para
1(b) infra) has arisen in cases other than fraud, wilful misstatement or suppression of facts.

The provision provides for – (a) Service of notice by the Proper Officer; (b) Notice shall be served on the
person who is chargeable with tax, who has – ⎯ Not paid or short paid the tax; ⎯ Wrongly availed or
utilized input tax credit; ⎯ Received the erroneous refund; (c) Such amounts as mentioned above shall
be required to be determined along with the applicable interest as per section 50 and penalty leviable
under the provisions of this Act or the rules made thereunder. (d) The notice has to be issued at least
three months prior to the time limit of three years for issuance of order. (e) The proper office shall along
with notice provide a summary in Form GST DRC-01 specifying therein the details of the amount
payable.

Where no notice is required to be issued for ‘periodical demand’: Subsequent to issue of a notice under
section 73(1) to a person, where the Proper Officer finds similar issues for any period, the Proper Officer
may, instead of issuing a detailed notice for such period, serve a statement containing the details of tax
not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such
subsequent period not covered in the earlier notice so issued under section 73(1). Service of such
statement shall be deemed to be service of notice as per Section 73(1) on the condition that the
grounds relied upon are the same as those mentioned in the earlier notice issued for previous period.
The proper office shall, along with the statement, provide a summary in Form GST DRC-02, specifying
therein the details of the amount payable. Care should be taken NOT to regard such ‘statement of
demand’ as being inferior or different from a show cause notice (“SCN”) issued under section 73(1)
[similarly under section 74(1))].
 ---25---

Voluntary payment of tax and interest before issue of notice/statement: Voluntary payment of tax and
interest as per section 50 before issue of notice/statement can be done either: • As per own
ascertainment of such tax and interest or; • As per the ascertainment of tax and interest by the Proper
Officer; in accordance with the provisions of the Act and the same shall be intimated to the Proper
Officer in Form GST DRC-03 and the Proper Officer shall issue an acknowledgement, accepting the
payment made, in FORM GST DRC–04. Thereafter, the Proper Officer shall not serve any notice /
statement to the extent of such payment. In such situations, there can be no further proceedings with
regard to tax and penalty so paid. Payment under Form GST DRC-03 would be a response to
departmental communication in FORM GST DRC–01A so as to comply with the opportunity afforded to
taxpayer under section 73(5) (similarly under 74(5)).

Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly
availed or utilised by reason of fraud or any wilful misstatement or suppression of facts. ( Section 74 )

No notice is required to be issued for ‘periodical demand’: Similar to the provisions of section 73
explained earlier, this section also provides that a statement containing the details of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or utilised be issued, shall be
issued for such periods other than those covered in the Notice under section 74(1) on the person
chargeable with tax, along with a summary in FORM GST DRC-02. This is issued in place of a detailed
notice for the period other than the ones covered in the notice issued as per section 74(1). Further,
service of such statement shall be deemed to be service of notice under section 73(1), subject to the
condition that the grounds relied upon in the said statement, except the ground of fraud, or any wilful-
misstatement or suppression of facts to evade tax, for periods other than those covered under section
74(1) are the same as those mentioned in the earlier notice.

The Proper Officer shall not serve any notice on the assessee in case of voluntary payment of tax and
interest along with penalty @ 15% of tax either • As per the own ascertainment of the tax or; • As per
the ascertainment of the Proper Officer; In both the above situations the person charged with tax shall
intimate the same to the Proper Officer in FORM GST DRC-03 and Proper Officer will provide
acknowledgment in FORM GST DRC-04 and no notice shall be served in respect of the tax so paid or any
penalty payable under the provisions of this Act or the rules made thereunder. In case, there exists
some shortfall between the amount paid by assessee on his own ascertainment and the actual amount
liable to be paid, the Proper Office shall issue a notice for the tax that remains unpaid.

Where the person makes the payment of tax and interest along with penalty equal to 25 % of tax within
30 days of issuance of Notice / Statement and intimates the Proper Officer of such payment in FORM
GST DRC-03, the Proper Officer shall issue an order in FORM GST DRC-05 concluding the proceedings in
respect of the said notice.

If the person makes any representation or files a reply, the Proper Officer shall issue an order after
considering the representation / reply in FORM GST DRC-06, and the amount determined shall comprise
of tax along with interest and penalty as stated above. A summary of such order shall be uploaded
electronically in FORM GST DRC07, specifying therein the amount of tax, interest and penalty payable by
the person chargeable with tax. Such summary of order in Form GST DRC-07 shall be treated as a notice
for recovery.

Where the assessee makes the payment of tax and interest along with penalty @ 50 % of tax within 30
days of communication of the order, then in such cases it shall be deemed that all the proceedings have
been concluded.
 ---26---

Initiation of recovery proceedings ( Section -78 ):-

This provision empowers the Proper Officer to collect any amount which is payable by a taxable person
in pursuance of an order passed under the Act.

This section enables initiation of proceedings for recovery of the amount from a taxable person.

The amount shall be paid by taxable person within a period of 3 months of the service of order, failing
which the Proper Officer shall initiate the recovery proceedings. Note that time to file appeal under
section 107 is 3 months and in harmony with that time limit, recovery action is kept in abeyance until
that time is passed. Although additional time to file appeal (1 month before Appellate Authority and 3
months before Appellate Tribunal) is permitted. Recovery action need not be kept in abeyance until
additional time is passed. Additional time is available not as a right but a remedy if sufficient cause is
shown. Care must be taken to avoid delay in filing appeal, so that recovery action is not initiated.

If it is in the interest of Revenue, the Proper Officer after recording the reasons in writing, may initiate
the recovery proceedings even before the completion of the said period of 3 months. However, this
section empowers the Proper Officer in the interest of revenue (after recording the reasons) to initiate
recovery proceedings even before the expiry of 3 months period.

Recovery of Tax ( Section – 79 ):-

The section empowers the departmental officers to collect/recover any amount which is payable under
GST Act. Section 79 provides for the manner in which the recovery proceedings can be carried out.

When any amount that is payable by any person (hereinafter referred to as defaulter) to Government is
not paid, the officer can adopt one or more of the methods set out in section 79 for recovery of
amounts payable. The methods are :
(a) Deduction out of any money owing to defaulter:
⎯ There should be some money which is being owed by the Government to defaulter;
⎯ The amount payable can be deducted out of the said amount due to defaulter;
⎯ The deduction can be done by the Proper Officer himself or he may ask any other specified
officer to do so.
⎯ The Proper Officer shall specify the amount so deducted in Form GST DRC-09 as prescribed in
rule 143 of the CGST Rules.
(b) By detaining and selling the goods belonging to defaulter:
⎯ There should be goods which are under the control of the Proper Officer or other specified
officer;
⎯ Such goods should belong to the person who is liable to pay any amount.
⎯ The goods may be detained and sold by the Proper Officer or such other specified officer on
request by the Proper Officer;
⎯ Out of the realisation, the amount payable by defaulter shall be recovered.
⎯ As per rule 144 of the CGST Rules, the goods shall be sold through a process of auction
including e-auction, for which a notice shall be issued in FORM GST DRC-10 clearly indicating the
goods to be sold and the purpose of sale. The last day for submission of bid or the date of
auction shall not be earlier than 15 days from the date of issue of the above notice. However, if
the goods are perishable or hazardous in nature or the expenses of storing them is likely to
exceed the value of such goods, then Proper Officer may sell them forthwith.
 ---27---

⎯ The Proper Officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring
him to make the payment within a period of 15 days from the date of auction. On payment of
the full bid amount, the possession of the said goods shall be transferred to the successful
bidder and Proper Officer shall issue a certificate in FORM GST DRC-12.

Liability to Pay in Certain Cases:-

Liability in case of Transfer of Business ( Section – 85 )

(1) Where a taxable person, liable to pay tax under this Act, transfers his business in whole or in
part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever, the taxable
person and the person to whom the business is so transferred shall, jointly and severally, be
liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from
the taxable person upto the time of such transfer, whether such tax, interest or penalty has
been determined before such transfer, but has remained unpaid or is determined thereafter.

(2) Where the transferee of a business referred to in subsection (1) carries on such business
either in his own name or in some other name, he shall be liable to pay tax on the supply of
goods or services or both effected by him with effect from the date of such transfer and shall, if
he is a registered person under this Act, apply within the prescribed time for amendment of his
certificate of registration.

This section deals with tax liability that may arise in case of transfer of business under certain
circumstances. It deals with the following situations:
⎯ Liability arising before the transfer of business as a whole or in part; and ⎯ Liability arising post
transfer of business as a whole or in part.
⎯ Such liability may arise on account of sale, gift, lease, leave and license, hire or in any other
manner.

Liability arising prior to transfer:

⎯ The provision applies when a taxable person who is liable to pay tax transfers his business
either wholly or in part, which could be by way of:
o Sale
o Gift
o Lease
o Leave and license
o Hire or
o In any other manner
⎯ The following cases are dealt with separately in this chapter and not covered under this
section:
o Amalgamation / merger -Section 87
o Liquidation – Section 88
o In case of death of proprietor – Section 93
 ---28---

Tax liability: Both transferor and transferee will be jointly and severally liable for payment of
taxes, interest or penalty due upto the time of transfer of business (wholly or partly). The joint
and several liability will remain fastened even if such amounts were determined and become
due after the transfer of business. Interestingly, even liability to pay penalty, which is quasi-
criminal in nature, is sought to be fastened on the transferee, although transferee would not
have been responsible for the non-payment of tax, interest or penalty liability by the transferor
prior to transfer of such business. Care must be taken to include ‘indemnity’ from transferor in
case of any such liabilities arising in future. It may be noted that only ‘payment’ of dues (tax,
interest and penalty) is joint-and-several with transferee but the process will only be against
transferor. It is interesting to note that the liability would be determined against the transferor
only, however, if it is not recovered from the transferor, the same would be recovered from the
transferee. There is no escape provided by the act against the transferee even if the transferee
has purchased the business in a bona-fide manner with no notice of any liability against the
transferor. Also, it is pertinent to note that this provision is for recovery and thus, the transferee
has no right to contest the liability which has been fastened against the transferor. However,
liability in case of transferor also would be subject to the limitation period as applicable in case
of transferee. It is pertinent to note that the provision does not provide for subrogation of rights
to contest the demand so determined for recovery from the transferee. The only right which
transferee has would be recovery of such paid taxes from the transferor.

Liability of Agent and Principal ( Section – 86 ):-

Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and
his principal shall, jointly and severally, be liable to pay the tax payable on such goods under this
Act.

Liability in case of amalgamation or merger of companies ( Section – 87 ):-

(1) When two or more companies are amalgamated or merged in pursuance of an order of court
or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the
order and any two or more of such companies have supplied or received any goods or services
or both to or from each other during the period commencing on the date from which the order
takes effect till the date of the order, then such transactions of supply and receipt shall be
included in the turnover of supply or receipt of the respective companies and they shall be liable
to tax accordingly.

(2) Notwithstanding anything contained in the said order, for all purposes of this Act, the said
two or more companies shall be treated as distinct companies for the period up to the date of
the said order and the registration certificates of the said companies shall be cancelled, with
effect from the date of the said order.
 ---29---

Liability of partners of firm to pay tax ( Section – 90 ):-

Notwithstanding any contract to the contrary and any other law for time being in force, where
any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the
partners of the firm shall jointly and severally, be liable for such payment: Provided that where
any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said
partner to the Commissioner by a notice in that behalf in writing and such partner shall be liable
to pay tax, interest or penalty due up to the date of his retirement whether determined or not,
on that date: Provided further that if no such intimation is given within one month from the
date of retirement, the liability of such partner under the first proviso shall continue until the
date on which such intimation is received by the Commissioner.

Liability in other cases ( Section – 94 ):-

(1) Where a taxable person is a firm or an association of persons or a Hindu Undivided Family
and such firm, association or family has discontinued business-
(a) the tax, interest or penalty payable under this Act by such firm, association or family up to
the date of such discontinuance may be determined as if no such discontinuance had taken
place; and
(b) every person who, at the time of such discontinuance, was a partner of such firm, or a
member of such association or family, shall, notwithstanding such discontinuance, jointly and
severally, be liable for the payment of tax and interest determined and penalty imposed and
payable by such firm, association or family, whether such tax and interest has been determined
or penalty imposed prior to or after such discontinuance and subject as aforesaid, the provisions
of this Act shall, so far as may be, apply as if every such person or partner or member were
himself a taxable person.

(2) Where a change has occurred in the constitution of a firm or an association of persons, the
partners of the firm or members of association, as it existed before and as it exists after the
reconstitution, shall, without prejudice to the provis ions of section 90, jointly and severally, be
liable to pay tax, interest and penalty due from such firm or association for any period before its
reconstitution.

(3) The provisions of sub-section (1) shall, so far as may be, apply where the taxable person,
being a firm or association of persons is dissolved or where the taxable person, being a Hindu
Undivided Family, has effected partition with respect to the business carried on by it and
accordingly references in that sub-section to discontinuance shall be construed as reference to
dissolution or, to partition. Explanation - For the purpose of this chapter, (a) a “limited liability
partnership” formed and registered under the provisions of the Limited Liability Partnership Act,
2008) shall also be considered as a firm. (b) “court” means the District Court, High Court or
Supreme Court.
 ---30---

Advance Ruling & Its Rules:-

Sections Rules
95. Definitions 103. Qualification and appointment of
members of the Authority for Advance Ruling
96. Authority for Advance Ruling*
104. Form and manner of application to the
97. Application for Advance Ruling Authority for Advance Ruling

98. Procedure on receipt of application 105. Certification of copies of advance rulings

pronounced by the Authority
99. Appellate Authority for Advance Ruling**
106. Form and manner of appeal to the
100. Appeal to Appellate Authority Appellate Authority for Advance Ruling

101. Orders of Appellate Authority 107. Certification of copies of the advance

rulings pronounced by the Appellate Authority
101A. Constitution of National Appellate
Authority for Advance Ruling 107A. Manual filing and processing

101B. Appeal to National Appellate Authority

101C. Order of National Appellate Authority

102. Rectification of advance ruling

103. Applicability of advance ruling

104. Advance ruling to be void in certain

circumstances

105. Powers of Authority, Appellate Authority

and National Appellate Authority

106. Procedure of Authority, Appellate

Authority and National Appellate Authority

*Section 96 of the State GST Acts

**Section 99 of the State GST Acts

 ---31---

Definitions ( Section – 95 ):-

In this Chapter, unless the context otherwise requires –

(a) “advance ruling” means a decision provided by the Authority or the Appellate Authority [or
the National Appellate Authority] to an applicant on matters or on questions specified in sub-
section (2) of section 97 or sub-section (1) of section 100 [or of section 101C], in relation to the
supply of goods or services or both being undertaken or proposed to be undertaken by the
applicant;
(b) "Appellate Authority" means the Appellate Authority for Advance Ruling referred to in
section 99;
(c) “applicant” means any person registered or desirous of obtaining registration under this Act;
(d) “application” means an application made to the Authority under sub-section (1) of section
97;
(e) “Authority” means the Authority for Advance Ruling, referred to in section 96; (f) [“National
Appellate Authority” means the National Appellate Authority for Advance Ruling referred to in
section 101A].

Authority for advance ruling ( Section – 96 ):-

Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance
ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory
Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of
that State or Union territory.

(1) The Government shall, by notification, constitute an Authority to be known as the Delhi/ the
Tamil Nadu Authority for Advance Ruling: Provided that the Government may, on the
recommendation of the Council, notify any Authority located in another State to act as the
Authority for the State.
(2) The Authority shall consist of-
(i) one member from amongst the officers of Central tax; and
(ii) one member from amongst the officers of State tax, to be appointed by the Central
Government and the State Government respectively.
(3) The qualifications, the method of appointment of the members and the terms and conditions
of their services shall be such as may be prescribed.

99. Appellate Authority for Advance Ruling Subject to the provisions of this Chapter, for the
purposes of this Act, the Appellate Authority for Advance Ruling constituted under the
provisions of a State Goods and Services Tax Act or a Union Territory Goods and Services Tax Act
shall be deemed to be the Appellate Authority in respect of that State or Union territory.
 ---32---

Application for advance ruling ( Section – 99 ):-

Subject to the provisions of this Chapter, for the purposes of this Act, the Appellate Authority for
Advance Ruling constituted under the provisions of a State Goods and Services Tax Act or a
Union Territory Goods and Services Tax Act shall be deemed to be the Appellate Authority in
respect of that State or Union territory.

Appeal to Appellate Authority ( Section – 100 )

(1) The concerned officer, the jurisdictional officer or an applicant aggrieved by any advance
ruling pronounced under sub-section (4) of section 98, may appeal to the Appellate
Authority.

(2) Every appeal under this section shall be filed within a period of thirty days from the date on
which the ruling sought to be appealed against is communicated to the concerned officer,
the jurisdictional officer and the applicant: Provided that the Appellate Authority may, if it is
satisfied that the appellant was prevented by a sufficient cause from presenting the appeal
within the said period of thirty days, allow it to be presented within a further period not
exceeding thirty days.

(3) Every appeal under this section shall be in such form, accompanied by such fee and verified
in such manner as may be prescribed.

Orders of Appellate Authority ( Section – 101 )

(1) The Appellate Authority may, after giving the parties to the appeal or reference an
opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling
appealed against or referred to.
(2) The order referred to in sub-section (1) shall be passed within a period of ninety days from
the date of filing of the appeal under section 100 or a reference under sub-section (5) of section
98.
(3) Where the members of the Appellate Authority differ on any point or points referred to in
appeal or reference, it shall be deemed that no advance ruling can be issued in respect of the
question under the appeal or reference.
(4) A copy of the advance ruling pronounced by the Appellate Authority duly signed by the
Members and certified in such manner as may be prescribed shall be sent to the applicant, the
concerned officer/the jurisdictional officer and to the Authority after such pronouncement.
 ---33---

Constitution of National Appellate Authority for Advance Ruling. ( Section – 101 A ):-

(1) The Government shall, on the recommendations of the Council, by notification, constitute,
with effect from such date as may be specified therein, an Authority known as the National
Appellate Authority for Advance Ruling for hearing appeals made under section 101B.
(2) The National Appellate Authority shall consist of— (i) the President, who has been a Judge
of the Supreme Court or is or has been the Chief Justice of a High Court, or is or has been a
Judge of a High Court for a period not less than five years; (ii) a Technical Member (Centre)
who is or has been a member of Indian Revenue (Customs and Central Excise) Service,
Group A, and has completed at least fifteen years of service in Group A; (iii) a Technical
Member (State) who is or has been an officer of the State Government not below the rank
of Additional Commissioner of Value Added Tax or the Additional Commissioner of State tax
with at least three years of experience in the administration of an existing law or the State
Goods and Services Tax Act or in the field of finance and taxation.
(3) The President of the National Appellate Authority shall be appointed by the Government
after consultation with the Chief Justice of India or his nominee: Provided that in the event of
the occurrence of any vacancy in the office of the President by reason of his death, resignation
or otherwise, the senior most Member of the National Appellate Authority shall act as the
President until the date on which a new President, appointed in accordance with the provisions
of this Act to fill such vacancy, enters upon his office: Provided further that where the President
is unable to discharge his functions owing to absence, illness or any other cause, the senior most
Member of the National Appellate Authority shall discharge the functions of the President until
the date on which the President resumes his duties.
(4) The Technical Member (Centre) and Technical Member (State) of the National Appellate
Authority shall be appointed by the Government on the recommendations of a Selection
Committee consisting of such persons and in such manner as may be prescribed.
(5) No appointment of the Members of the National Appellate Authority shall be invalid merely
by the reason of any vacancy or defect in the constitution of the Selection Committee.
(6) Before appointing any person as the President or Members of the National Appellate
Authority, the Government shall satisfy itself that such person does not have any financial or
other interests which are likely to prejudicially affect his functions as such President or Member.
(7) The salary, allowances and other terms and conditions of service of the President and the
Members of the National Appellate Authority shall be such as may be prescribed: Provided that
neither salary and allowances nor other terms and conditions of service of the President or
Members of the National Appellate Authority shall be varied to their disadvantage after their
appointment.
(8) The President of the National Appellate Authority shall hold office for a term of three years
from the date on which he enters upon his office, or until he attains the age of seventy years,
whichever is earlier and shall also be eligible for reappointment.
(9) The Technical Member (Centre) or Technical Member (State) of the National Appellate
Authority shall hold office for a term of five years from the date on which he enters upon his
office, or until he attains the age of sixty-five years, whichever is earlier and shall also be eligible
for reappointment.
(10) The President or any Member may, by notice in writing under his hand addressed to the
Government, resign from his office: Provided that the President or Member shall continue to
hold office until the expiry of three months from the date of receipt of such notice by the
Government, or until a person duly appointed as his successor enters upon his office or until the
expiry of his term of office, whichever is the earliest.
 ---34---

(11) The Government may, after consultation with the Chief Justice of India, remove from the
office such President or Member, who— (a) has been adjudged an insolvent; or (b) has been
convicted of an offence which, in the opinion of such Government involves moral turpitude; or
(c) has become physically or mentally incapable of acting as such President or Member; or (d)
has acquired such financial or other interest as is likely to affect prejudicially his functions as
such President or Member; or (e) has so abused his position as to render his continuance in
office prejudicial to the public interest: Provided that the President or the Member shall not be
removed on any of the grounds specified in clauses (d) and (e), unless he has been informed of
the charges against him and has been given an opportunity of being heard.
(12) Without prejudice to the provisions of sub-section (11), the President and Technical
Members of the National Appellate Authority shall not be removed from their office except by
an order made by the Government on the ground of proven misbehaviour or incapacity after an
inquiry made by a Judge of the Supreme Court nominated by the Chief Justice of India on a
reference made to him by the Government and such President or Member had been given an
opportunity of being heard.
(13) The Government, with the concurrence of the Chief Justice of India, may suspend from
office, the President or Technical Members of the National Appellate Authority in respect of
whom a reference has been made to the Judge of the Supreme Court under sub-section (12).
(14) Subject to the provisions of article 220 of the Constitution, the President or Members of the
National Appellate Authority, on ceasing to hold their office, shall not be eligible to appear, act
or plead before the National Appellate Authority where he was the President or, as the case
may be, a Member.

Administration:-

Officers under this Act ( Section – 3 ):-

The Government shall, by notification, appoint the following classes of officers for the purposes of this
Act, namely: ––
(a) Principal Chief Commissioners of Central Tax or Principal Directors General of Central Tax,
(b) Chief Commissioners of Central Tax or Directors General of Central Tax,
(c) Principal Commissioners of Central Tax or Principal Additional Directors General of Central Tax,
(d) Commissioners of Central Tax or Additional Directors General of Central Tax,
(e) Additional Commissioners of Central Tax or Additional Directors of Central Tax,
(f) Joint Commissioners of Central Tax or Joint Directors of Central Tax,
(g) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax,
(h) Assistant Commissioners of Central Tax or Assistant Directors of Central Tax, and
(i) any other class of officers as it may deem fit:

Provided that the officers appointed under the Central Excise Act, 1944 shall be deemed to be the
officers appointed under the provisions of this Act.
 ---35---

Appointment of Officers :-

(1) The Board may, in addition to the officers as may be notified by the Government under section 3,
appoint such persons as it may think fit to be the officers under this Act.
(2) Without prejudice to the provisions of sub-section (1), the Board may, by order, authorise any officer
referred to in clauses (a) to (h) of section 3 to appoint officers of central tax below the rank of Assistant
Commissioner of central tax for the administration of this Act.

Powers of Officers :-

(1) Subject to such conditions and limitations as the Board may impose, an officer of central tax may
exercise the powers and discharge the duties conferred or imposed on him under this Act.

(2) An officer of central tax may exercise the powers and discharge the duties conferred or imposed
under this Act on any other officer of central tax who is subordinate to him.

(3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf
by him, delegate his powers to any other officer who is subordinate to him.

(4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the
powers and discharge the duties conferred or imposed on any other officer of central tax.

Appeals:-

APPEALS TO APPELLATE AUTHORITY [SECTION 107]:_

Appeal to Appellate Authority (AA) by aggrieved person (taxpayer) (i) Orders appealable to AA An appeal
against any decision/order passed by any adjudicating authority under the CGST Act or SGST Act/UTGST
Act lies before the AA. It is important to note that it is only the aggrieved person who can file the appeal.
Also, the appeal must be against a decision or order passed under the Act. (ii) Time limit for filing appeal
A person aggrieved by any decision/order of an adjudicating authority can file an appeal to the AA
within 3 months from the date of communication of such decision/order. (iii) Form for appeal to AA by
the aggrieved person (taxpayer) and date of filing appeal An appeal is to be filed by aggrieved person to
the Appellate Authority in Form GST APL-01 along with the relevant documents. A provisional
acknowledgement is issued to the appellant immediately. Subsequently, where the decision or order
appealed against is uploaded on the common portal, a final acknowledgment, indicating appeal number,
shall be issued by the Appellate Authority or an officer authorised by him in this behalf in Form GST APL-
02. The date of issue of the provisional acknowledgment shall be considered as the date of filing of
appeal. (iv) Mandatory pre-deposit for filing appeal No appeal can be filed before the AA unless a
specified amount of predeposit is made by the appellant.
 ---36---

Application before the AA by the Department

At times, the Department itself may not agree with the decision or order passed by the adjudicating
authority. Section 107(2) provides that in such cases, the Department can also file an appeal (referred to
as ‘review application’) before the AA. (i) Orders against which the application can be filed before the AA
The Commissioner may, on his own motion, or upon request from the SGST/UTGST Commissioner,
examine the record of any proceedings in which an adjudicating authority has passed any decision/order
under the CGST Act or SGST Act/UTGST Act to satisfy himself about the legality or propriety of such
decision/order [Section 107(2)]. (ii) Time limit for filing the application The Commissioner may, by order,
direct any officer subordinate to him to apply to the AA within 6 months from the date of
communication of the decision/order for the determination of such points arising out of the said
decision/order as may be specified by him. The AA can condone the delay in filing of appeal by 1 month
if it is satisfied that there was sufficient cause for such delay (iii) Form for application An application to
the AA shall be filed in Form GST APL-03, along with the relevant documents, either electronically or
otherwise as may be notified by the Commissioner and a provisional acknowledgment shall be issued to
the appellant immediately. Where the decision/order appealed against is uploaded on the common
portal, a final acknowledgment, indicating appeal number, shall be issued by the Appellate Authority or
an officer authorised by him in this behalf in Form GST APL-02. The date of issue of the provisional
acknowledgment shall be considered as the date of filing of appeal. However, where the decision or
order appealed against is not uploaded on the common portal, the appellant shall submit a self certified
copy of the said decision or order within a period of 7 days from the date of filing of Form GST APL-03.
The final acknowledgment, indicating appeal number, shall be issued by the Appellate Authority or an
officer authorised by him in this behalf in Form GST APL-02. The date of issue of the provisional
acknowledgment shall be considered as the date of filing of appeal Further, where the said self-certified
copy of the decision or order is not submitted within a period of 7 days from the date of filing of Form
GST APL-03, the date of submission of such copy shall be considered as the date of filing of appeal. (iv)
Application to be treated as appeal Such application shall be dealt with by the AA as if it were an appeal
made against the decision/order of the adjudicating authority [Section 107(3)]. There is no requirement
of making a pre-deposit in the case of departmental appeal.

Appointment of Appellate Authority :-

Any person aggrieved by any decision/order passed under GST law or an officer directed to appeal
against any decision/order passed under said law, may appeal within 3 months (6 months in case of
appeal by the Department) from the date of communication of said decision/order

PENALTY FOR CERTAIN OFFENCES [SECTION 122 OF CGST ACT]:-

(1) Where a taxable person who- (i) supplies any goods or services or both without issue of any invoice
or issues an incorrect or false invoice with regard to any such supply; (ii) issues any invoice or bill
without supply of goods or services or both in violation of the provisions of this Act or the rules made
thereunder; (iii) collects any amount as tax but fails to pay the same to the Government beyond a period
of three months from the date on which such payment becomes due; (iv) collects any tax in
contravention of the provisions of this Act but fails to pay the same to the Government beyond a period
of three months from the date on which such payment becomes due; (v) fails to deduct the tax in
accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than
the amount required to be deducted under the said sub-section, or where he fails to pay to the
Government under sub-section (2) thereof, the amount deducted as tax; (vi) fails to collect tax in
accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than
the amount required to be collected under the said sub-section or where he fails to pay to the
 ---37---

Government the amount collected as tax under sub-section (3) of section 52; (vii) takes or utilizes input
tax credit without actual receipt of goods or services or both either fully or partially, in contravention of
the provisions of this Act or the rules made thereunder; (viii) fraudulently obtains refund of tax under
this Act; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made
thereunder; (x) falsifies or substitutes financial records or produces fake accounts or documents or
furnishes any false information or return with an intention to evade payment of tax due under this Act;
(xi) is liable to be registered under this Act but fails to obtain registration; (xii) furnishes any false
information with regard to registration particulars, either at the time of applying for registration, or
subsequently; (xiii) obstructs or prevents any officer in discharge of his duties under this Act; (xiv)
transports any taxable goods without the cover of documents as may be specified in this behalf; (xv)
suppresses his turnover leading to evasion of tax under this Act; (xvi) fails to keep, maintain or retain
books of account and other documents in accordance with the provisions of this Act or the rules made
thereunder; (xvii) fails to furnish information or documents called for by an officer in accordance with
the provisions of this Act or the rules made there under or furnishes false information or documents
during any proceedings under this Act; (xviii) supplies, transports or stores any goods which he has
reason to believe are liable to confiscation under this Act; (xix) issues any invoice or document by using
the registration number of another registered person; (xx) tampers with, or destroys any material
evidence or document; (xxi) disposes off or tampers with any goods that have been detained, seized, or
attached under this Act; he shall be liable to pay a penalty of ten thousand rupees or an amount
equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted
but not paid to the Government or tax not collected under section 52 or short collected or collected but
not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the
refund claimed fraudulently, whichever is higher.

(1A) Any Person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix)
of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an
amount equivalent to the tax evaded or input tax credit availed or passed on.] 2 [(1B) Any electronic
commerce operator who–– (i) allows a supply of goods or services or both through it by an unregistered
person other than a person exempted from registration by a notification issued under this Act to make
such supply; (ii) allows an inter-State supply of goods or services or both through it by a person who is
not eligible to make such inter-State supply; or (iii) fails to furnish the correct details in the statement to
be furnished under subsection (4) of section 52 of any outward supply of goods effected through it by a
person exempted from obtaining registration under this Act, shall be liable to pay a penalty of ten
thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by
a registered person other than a person paying tax under section 10, whichever is higher.] (2) Any
registered person who supplies any goods or services or both on which any tax has not been paid or
short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilized,-
(a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to
evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such
person, whichever is higher; (b) for reason of fraud or any wilful misstatement or suppression of facts to
evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person,
whichever is higher. (3) Any person who- (a) aids or abets any of the offences specified in clauses (i) to
(xxi) of sub-section (1); (b) acquires possession of, or in any way concerns himself in transporting,
removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with
any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules
made thereunder; (c) receives or is in any way concerned with the supply of, or in any other manner
deals with any supply of services which he knows or has reason to believe are in contravention of any
provisions of this Act or the rules made thereunder; (d) fails to appear before the officer of central tax,
when issued with a summon for appearance to give evidence or produce a document in an inquiry; (e)
 ---38---

fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails
to account for an invoice in his books of account, shall be liable to a penalty which may extend to
twenty-five thousand rupees.

Penalty for failure to furnish information return ( Section – 123 ):-

If a person who is required to furnish an information return under section 150 fails to do so within the
period specified in the notice issued under sub-section (3) thereof, the proper officer may direct that
such person shall be liable to pay a penalty of one hundred rupees for each day of the period during
which the failure to furnish such return continues: Provided that the penalty imposed under this section
shall not exceed five thousand rupees.

Fine for failure to furnish statistics ( Section – 124 ):-

If any person required to furnish any information or return under section 151, — (a) without reasonable
cause fails to furnish such information or return as may be required under that section, or (b) wilfully
furnishes or causes to furnish any information or return which he knows to be false, he shall be
punishable with a fine which may extend to ten thousand rupees and in case of a continuing offence to a
further fine which may extend to one hundred rupees for each day after the first day during which the
offence continues subject to a maximum limit of twenty-five thousand rupees.

General Penalty ( Section – 125 ):-

Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which
no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-
five thousand rupees.

Power to impose penalty in certain cases ( Section – 127 ):-

Where the proper officer is of the view that a person is liable to a penalty and the same is not covered
under any proceeding under sections 62, or section 63 or section 64 or section 73 or section 74 or
section 129 or section 130, he may issue an order levying such penalty after giving a reasonable
opportunity of being heard to such person.

Power to waive penalty or fee or both ( Section – 128 ):-

The Government may, by notification, waive in part or full, any penalty referred to in section 122 or
section 123 or section 125 or any late fee referred to in section 47 for such class of taxpayers and under
such mitigating circumstances as may be specified therein on the recommendations of the Council.

Punishment for certain offences ( Section – 132 ):-

(1) [Whoever commits, or causes to commit and retain the benefits arising out of, any of the following
offences], namely: - (a) supplies any goods or services or both without issue of any invoice, in violation
of the provisions of this Act or the rules made thereunder, with the intention to evade tax; (b) issues any
invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the
rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
(c) 15[avails input tax credit using such invoice or bill referred to in clause (b) or fraudulently avails input
tax credit without any invoice or bill]; (d) collects any amount as tax but fails to pay the same to the
Government beyond a period of three months from the date on which such payment becomes due; (e)
 ---39---

evades tax, 16[fraudulently avails input tax credit] or fraudulently obtains refund and where such
offence is not covered under clauses (a) to (d); (f) falsifies or substitutes financial records or produces
fake accounts or documents or furnishes any false information with an intention to evade payment of
tax due under this Act; 17[(g) obstructs or prevents any officer in the discharge of his duties under this
Act;] (h) acquires possession of, or in any way concerns himself in transporting, removing, depositing,
keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he
knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply
of services which he knows or has reasons to believe are in contravention of any provisions of this Act or
the rules made thereunder; 17 [(j) tampers with or destroys any material evidence or documents;] 17[(k)
fails to supply any information which he is required to supply under this Act or the rules made
thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the
information supplied by him is true) supplies false information;] or (l) attempts to commit, or abets the
commission of any of the offences mentioned in 18[clauses (a) to (k)] of this section, shall be punishable
– (i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or
utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment
for a term which may extend to five years and with fine; (ii) in cases where the amount of tax evaded or
the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken
exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for
a term which may extend to three years and with fine; (iii) in the case of 19[any other offence] where
the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of
refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees,
with imprisonment for a term which may extend to one year and with fine; (iv) in cases where he
commits or abets the commission of an offence specified in clause (f) or 20[clause (g) or clause (j)], he
shall be punishable with imprisonment for a term which may extend to six months or with fine or with
both. (2) Where any person convicted of an offence under this section is again convicted of an offence
under this section, then, he shall be punishable for the second and for every subsequent offence with
imprisonment for a term which may extend to five years and with fine. (3) The imprisonment referred to
in clauses (i), (ii) and (iii) of sub-section (1) and subsection (2) shall, in the absence of special and
adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less
than six months. (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of
1974), all offences under this Act, except the offences referred to in sub-section (5) shall be non-
cognizable and bailable. (5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of
subsection (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.
(6) A person shall not be prosecuted for any offence under this section except with the previous
sanction of the Commissioner. Explanation. — For the purposes of this section, the term “tax” shall
include the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or refund
wrongly taken under the provisions of this Act, the State Goods and Services Tax Act, the Integrated
Goods and Services Tax Act or the Union Territory Goods and Services Tax Act and cess levied under the
Goods and Services Tax (Compensation to States) Act.
 ---40---

Compounding of offences ( Section – 138 ):-

Any offence under this Act may, either before or after the institution of prosecution, be compounded by
the Commissioner on payment, by the person accused of the offence, to the Central Government or the
State Government, as the case be, of such compounding amount in such manner as may be prescribed:
Provided that nothing contained in this section shall apply to— [(a) a person who has been allowed to
compound once in respect of any of the offences specified in clauses (a) to (f) of sub-section (1) of
section 132 and the offences specified in clause (l) which are relatable to offences specified in clauses (a)
to (f) of the said sub-section;] [(b) a person who has been allowed to compound once in respect of any
offence, other than those in clause (a), under this Act or under the provisions of any State Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act or the Integrated Goods and Services
Tax Act in respect of supplies of value exceeding one crore rupees;] [(c) a person who has been accused
of committing an offence under this Act which is also an offence under any other law for the time being
in force;] (d) a person who has been convicted for an offence under this Act by a court; [(e) a person
who has been accused of committing an offence specified in clause (g) or clause (j) or clause (k) of sub-
section (1) of section 132;] and (f) any other class of persons or offences as may be prescribed: Provided
further that any compounding allowed under the provisions of this section shall not affect the
proceedings, if any, instituted under any other law: Provided also that compounding shall be allowed
only after making payment of tax, interest and penalty involved in such offences. (2) The amount for
compounding of offences under this section shall be such as may be prescribed, subject to the minimum
amount not being less than 25[ten thousand rupees or fifty per cent of the tax involved, whichever is
higher, and the maximum amount not being less than thirty thousand rupees or one hundred and fifty
per cent. of the tax, whichever is higher]. (3) On payment of such compounding amount as may be
determined by the Commissioner, no further proceedings shall be initiated under this Act against the
accused person in respect of the same offence and any criminal proceedings, if already initiated in
respect of the said offence, shall stand abated.

Anti Profiteering Measures and its Rules ( Section – 171 ):-

Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be
passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government
may, on recommendations of the Council, by notification, constitute an Authority, or empower an
existing Authority constituted under any law for the time being in force, to examine whether input tax
credits availed by any registered person or the reduction in the tax rate have actually resulted in a
commensurate reduction in the price of the goods or services or both supplied by him. (3) The Authority
referred to in sub-section (2) shall exercise such powers and discharge such functions as may be
prescribed. (3A) [Where the Authority referred to in sub-section (2) after holding examination as
required under the said sub-section comes to the conclusion that any registered person has profiteered
under sub- section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the
amount so profiteered: Provided that no penalty shall be leviable if the profiteered amount is deposited
within thirty days of the date of passing of the order by the Authority. Explanation.— For the purposes
of this section, the expression “profiteered” shall mean the amount determined on account of not
passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of
input tax credit to the recipient by way of commensurate reduction in the price of the goods or services
or both]
 ---41---

Extract of the CGST Rules, 2017:-

Power to determine the methodology and procedure ( Rule – CGST – 126 ):-

The Authority may determine the methodology and procedure for determination as to whether the
reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit has been
passed on by the registered person to the recipient by way of commensurate reduction in prices.

Functions of the Authority ( Rule – 127 ):-

The authority shall discharge the following functions, namely:-] (i) to determine whether any reduction
in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on
to the recipient by way of commensurate reduction in prices; (ii) to identify the registered person who
has not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit
of input tax credit to the recipient by way of commensurate reduction in prices; (iii) to order, (a)
reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by
way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the
date of collection of the higher amount till the date of the return of such amount or recovery of the
amount not returned, as the case may be, in case the eligible person does not claim return of the
amount or is not identifiable, and depositing the same in the Fund referred to in section 57; (c)
imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act. [(iv) to
furnish a performance report to the Council by the tenth [day] of the close of each quarter]

Examination of application by the Standing Committee and Screening Committee ( Rule – 128 ):-

(1) The Standing Committee shall, within a period of two months from the date of the receipt of a
written application,[or within such extended period not exceeding a further period of one month for
reasons to be recorded in writing as may be allowed by the Authority,] in such form and manner as may
be specified by it, from an interested party or from a Commissioner or any other person, examine the
accuracy and adequacy of the evidence provided in the application to determine whether there is prima-
facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on
any supply of goods or services or the benefit of input tax credit has not been passed on to the recipient
by way of commensurate reduction in prices. (2) All applications from interested parties on issues of
local nature [or those forwarded by the Standing Committee] shall first be examined by the State level
Screening Committee and the Screening Committee shall, [within two months from the date of receipt
of a written application, or within such extended period not exceeding a further period of one month for
reasons to be recorded in writing as may be allowed by the Authority,] upon being satisfied that the
supplier has contravened the provisions of section 171, forward the application with its
recommendations to the Standing Committee for further action.

Initiation and conduct of proceedings ( Rule – 129 ):-

(1) Where the Standing Committee is satisfied that there is a prima-facie evidence to show that the
supplier has not passed on the benefit of reduction in the rate of tax on the supply of goods or services
or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, it shall
refer the matter to the 28[Directorate General of Anti-Profiteering] for a detailed investigation. (2) The
28[Directorate General of Anti-Profiteering] shall conduct investigation and collect evidence necessary
to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or
the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in
prices. (3) The 28[Directorate General of Anti-Profiteering] shall, before initiation of the investigation,
 ---42---

issue a notice to the interested parties containing, inter alia, information on the following, namely:- (a)
the description of the goods or services in respect of which the proceedings have been initiated; (b)
summary of the statement of facts on which the allegations are based; and (c) the time limit allowed to
the interested parties and other persons who may have information related to the proceedings for
furnishing their reply. (4) The 28[Directorate General of Anti-Profiteering] may also issue notices to such
other persons as deemed fit for a fair enquiry into the matter. (5) The [Directorate General of Anti-
Profiteering] shall make available the evidence presented to it by one interested party to the other
interested parties, participating in the proceedings. (6) The [Directorate General of Anti-Profiteering]
shall complete the investigation within a period of [six] 29 months of the receipt of the reference from
the Standing Committee or within such extended period not exceeding a further period of three months
for reasons to be recorded in writing [as may be allowed by the Authority] and, upon completion of the
investigation, furnish to the Authority, a report of its findings along with the relevant records.

E-Way Bill and its Rules:-

Information to be furnished prior to commencement of movement of goods and generation of e-way

bill( Rule – 138 ):-

(1) Every registered person who causes movement of goods of consignment value exceeding fifty
thousand rupees— (i) in relation to a supply; or (ii) for reasons other than supply; or (iii) due to inward
supply from an unregistered person, shall, before commencement of such movement, furnish
information relating to the said goods as specified in Part A of FORM GST EWB-01, electronically, on the
common portal along with such other information as may be required on the common portal and a
unique number will be generated on the said portal: Provided that the transporter, on an authorization
received from the registered person, may furnish information in Part A of FORM GST EWB-01,
electronically, on the common portal along with such other information as may be required on the
common portal and a unique number will be generated on the said portal: Provided further that where
the goods to be transported are supplied through an e - commerce operator or a courier agency, on an
authorization received from the consignor, the information in Part A of FORM GST EWB-01 may be
furnished by such e-commerce operator or courier agency and a unique number will be generated on
the said portal: Provided also that where goods are sent by a principal located in one State or Union
territory to a job worker located in any other State or Union territory, the e-way bill shall be generated
either by the principal or the job worker, if registered, irrespective of the value of the consignment:
Provided also that where handicraft goods are transported from one State or Union territory to another
State or Union territory by a person who has been exempted from the requirement of obtaining
registration under clauses (i) and (ii) of section 24, the eway bill shall be generated by the said person
irrespective of the value of the consignment. 5[Explanation 1. – For the purposes of this rule, the
expression “handicraft goods” has the meaning as assigned to it in the Government of India, Ministry of
Finance Notification No. 56/2018-Central Tax dated the 23rd October, 2018 published in the Gazette of
India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1056 (E) dated the 23rd
October, 2018 as amended from time to time]. Explanation 2.- For the purposes of this rule, the
consignment value of goods shall be the value, determined in accordance with the provisions of section
15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in resp ect of
the said consignment and also includes the Central tax, State or Union territory tax, integrated tax and
cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the
invoice is issued in respect of both exempt and taxable supply of goods.
 ---43---

(2) Where the goods are transported by the registered person as a consignor or the recipient of supply
as the consignee, whether in his own conveyance or a hired one or a public conveyance, by road, the
said person shall generate the e-way bill in FORM GST EWB-01 electronically on the common portal after
furnishing information in Part B of FORM GST EWB-01. (2A) Where the goods are transported by
railways or by air or vessel, the e-way bill shall be generated by the registered person, being the supplier
or the recipient, who shall, either before or after the commencement of movement, furnish, on the
common portal, the information in Part B of FORM GST EWB-01: Provided that where the goods are
transported by railways, the rai lways shall not deliver the goods unless the e-way bill required under
these rules is produced at the time of delivery. (3) Where the e-way bill is not generated under sub-rule
(2) and the goods are handed over to a transporter for transportation by road, the registered person
shall furnish the information relating to the transporter on the common portal and the e-way bill shall
be generated by the transporter on the said portal on the basis of the information furnished by the
registered person in Part A of FORM GST EWB-01: Provided that the registered person or, the
transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is
less than fifty thousand rupees: Provided further that where the movement is caused by an unregistered
person either in his own conveyance or a hired one or through a transporter, he or the transporter may,
at their option, generate the e-way bill in FORM GST EWB-01 on the common portal in the manner
specified in this rule: Provided also that where the goods are transported for a distance of upto fifty
kilometers within the State or Union territory from the place of business of the consignor to the place of
business of the transporter for further transportation, the supplier or the recipient, or as the case may
be, the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01.
Explanation 1. – For the purposes of this sub-rule, where the goods are supplied by an unregistered
supplier to a recipient who is registered, the movement shall be said to be caused by such recipient if
the recipient is known at the time of commencement of the movement of goods. Explanation 2. - The e-
way bill shall not be valid for movement of goods by road unless the information in Part-B of FORM GST
EWB-01 has been furnished except in the case of movements covered under the third proviso to sub-
rule (3) and the proviso to sub-rule (5). (4) Upon generation of the e-way bill on the common portal, a
unique e-way bill number (EBN) shall be made available to the supplier, the recipient and the
transporter on the common portal. (5) Where the goods are transferred from one conveyance to
another, the consignor or the recipient, who has provided information in Part A of the FORM GST EWB-
01, or the transporter shall, before such transfer and further movement of goods, update the details of
conveyance in the e-way bill on the common portal in Part B of FORM GST EWB-01: Provided that where
the goods are transported for a distance of upto fifty kilometers within the State or Union territory from
the place of business of the transporter finally to the place of business of the consignee, the details of
the conveyance may not be updated in the e-way bill. (5A) The consignor or the recipient, who has
furnished the information in Part A of FORM GST EWB-01, or the transporter, may assign the e-way bill
number to another registered or enrolled transporter for updating the information in Part B of FORM
GST EWB-01 for further movement of the consignment: Provided that after the details of the
conveyance have been updated by the transporter in Part B of FORM GST EWB-01, the consignor or
recipient, as the case may be, who has furnished the information in Part A of FORM GST EWB-01 shall
not be allowed to assign the e-way bill number to another transporter. (6) After e-way bill has been
generated in accordance with the provisions of sub-rule (1), where multiple consignments are intended
to be transported in one conveyance, the transporter may indicate the serial number of e-way bills
generated in respect of each such consignment electronically on the common portal and a consolidated
e-way bill in FORM GST EWB-02 maybe generated by him on the said common portal prior to the
movement of goods. (7) Where the consignor or the consignee has not generated the e-way bill in
FORM GST EWB-01 and the aggregate of the consignment value of goods carried in the conveyance is
more than fifty thousand rupees, the transporter, except in case of transportation of goods by railways,
air and vessel, shall, in respect of inter-State supply, generate the e-way bill in FORM GST EWB-01 on the
basis of invoice or bill of supply or delivery challan, as the case may be, and may also generate a
 ---44---

consolidated e-way bill in FORM GST EWB-02 on the common portal prior to the movement of goods:
Provided that where the goods to be transported are supplied through an e-commerce operator or a
courier agency, the information in Part A of FORM GST EWB-01 may be furnished by such e-commerce
operator or courier agency. (8) The information furnished in Part A of FORM GST EWB-01 shall be made
available to the registered supplier on the common portal who may utilize the same for furnishing the
details in FORM GSTR-1: Provided that when the information has been furnished by an unregistered
supplier or an unregistered recipient in FORM GST EWB-01, he shall be informed electronically, if the
mobile number or the e-mail is available. (9) Where an e-way bill has been generated under this rule,
but goods are either not transported or are not transported as per the details furnished in the e-way bill,
the eway bill may be cancelled electronically on the common portal within twenty-four hours of
generation of the e-way bill: Provided that an e-way bill cannot be cancelled if it has been verified in
transit in accordance with the provisions of rule 138B: Provided further that the unique number
generated under sub-rule (1) shall be valid for a period of fifteen days for updation of Part B of FORM
GST EWB-01. (10) An e-way bill or a consolidated e-way bill generated under this rule shall be valid for
the period as mentioned in column (3) of the Table below from the relevant date, for the distance,
within the country, the goods have to be transported, as mentioned in column (2) of the said Table:-

SL .No Distance Validity period

1. Upto [200 km]. One day in cases other than Over Dimensional Cargo [or multimodal
shipment in which at least one leg involves transport by ship]
2. For every [200 km.] One additional day in cases other than Over Dimensional Cargo [or
or part thereof multimodal shipment in which at least one leg involves transport by
thereafter ship]
3. Upto 20 km One day in case of Over Dimensional Cargo [or multimodal shipment
in which at least one leg involves transport by ship]
4. For every 20 km. or One additional day in case of Over Dimensional Cargo [or multimodal
part thereof shipment in which at least one leg involves transport by ship]
thereafter

Provided that the Commissioner may, on the recommendations of the Council, by notification, extend
the validity period of an e-way bill for certain categories of goods as may be specified therein: Provided
further that where, under circumstances of an exceptional nature, including trans-shipment, the goods
cannot be transported within the validity period of the e-way bill, the transporter may extend the
validity period after updating the details in Part B of FORM GST EWB-01, if required. 12[Provided also
that the validity of the e-way bill may be extended within eight hours from the time of its expiry.]
Explanation 1.—For the purposes of this rule, the “relevant date” shall mean the date on which the e-
way bill has been generated and the period of validity shall be counted from the time at which the e-
way bill has been generated and each day shall be counted as the period expiring at midnight of the day
immediately following the date of generation of e-way bill. Explanation 2.— For the purposes of this
rule, the expression “Over Dimensional Cargo” shall mean a cargo carried as a single indivisible unit and
which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989,
made under the Motor Vehicles Act, 1988 (59 of 1988). (11) The details of the e-way bill generated
under this rule shall be made available to the- (a) supplier, if registered, where the information in Part A
of FORM GST EWB-01 has been furnished by the recipient or the transporter; or (b) recipient, if
registered, where the information in Part A of FORM GST EWB-01 has been furnished by the supplier or
the transporter, on the common portal, and the supplier or the recipient, as the case may be, shall
communicate his acceptance or rejection of the consignment covered by the e-way bill. (12) Where the
person to whom the information specified in sub-rule (11) has been made available does not
communicate his acceptance or rejection within seventy two hours of the details being made available
to him on the common portal, or the time of delivery of goods whichever is earlier, it shall be deemed
 ---45---

that he has accepted the said details. (13) The e-way bill generated under this rule or under rule 138 of
the Goods and Services Tax Rules of any State or Union territory shall be valid in every State and Union
territory. (14) Notwithstanding anything contained in this rule, no e-way bill is required to be
generated— (a) where the goods being transported are specified in Annexure; (b) where the goods are
being transported by a non-motorised conveyance; (c) where the goods are being transported from the
customs port, airport, air cargo complex and land customs station to an inland container depot or a
container freight station for clearance by Customs; (d) in respect of movement of goods within such
areas as are notified under clause (d) of sub-rule (14) of rule 138 of the State or Union territory Goods
and Services Tax Rules in that particular State or Union territory; (e) where the goods, other than de-
oiled cake, being transported, are specified in the Schedule appended to notification No. 2/2017-
Central tax (Rate) dated the 28th June, 2017 published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i), vide number G.S.R 674 (E) dated the 28th June, 2017 as amended from time to
time; (f) where the goods being transported are alcoholic liquor for human consumption, petroleum
crude, high speed diesel, motor spirit (commonly known as petrol), natural gas or aviation turbine fuel;
(g) where the supply of goods being transported is treated as no supply under Schedule III of the Act; (h)
where the goods are being transported— (i) under customs bond from an inland container depot or a
container freight station to a customs port, airport, air cargo complex and land customs station, or from
one customs station or customs port to another customs station or customs port, or (ii) under customs
supervision or under customs seal; (i) where the goods being transported are transit cargo from or to
Nepal or Bhutan; (j) where the goods being transported are exempt from tax under Notification No.
7/2017-Central Tax (Rate), dated 28th June 2017 published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i), vide number G.S.R 679(E)dated the 28th June, 2017 as amended from time to
time and Notification No. 26/2017- Central Tax (Rate), dated the 21st September, 2017 published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1181(E) dated the
21st September, 2017 as amended from time to time; (k) any movement of goods caused by defence
formation under Ministry of defence as a consignor or consignee; (l) where the consignor of goods is the
Central Government, Government of any State or a local authority for transport of goods by rail; (m)
where empty cargo containers are being transported; and (n) where the goods are being transported
upto a distance of twenty kilometers from the place of the business of the consignor to a weighbridge
for weighment or from the weighbridge back to the place of the business of the said consignor subject
to the condition that the movement of goods is accompanied by a delivery challan issued in accordance
with rule 55. [(o) where empty cylinders for packing of liquefied petroleum gas are being moved for
reasons other than supply.] Explanation. The facility of generation, cancellation, updation and
assignment of eway bill shall be made available through SMS to the supplier, recipient and the
transporter, as the case may be.

TDS-TCS:-

Tax Deduction at Source ( Section 51 ):-

(1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate, ––
(a) a department or establishment of the Central Government or State Government; or (b) local
authority; or (c) Governmental agencies; or (d) such persons or category of persons as may be notified
by the Government on the recommendations of the Council, (hereafter in this section referred to as “the
deductor”), to deduct tax at the rate of one per cent from the payment made or credited to the supplier
(hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the
total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees: Provided that
no deduction shall be made if the location of the supplier and the place of supply is in a State or Union
territory which is different from the State or as the case may be, Union territory of registration of the
 ---46---

recipient. Explanation. ––For the purpose of deduction of tax specified above, the value of supply shall
be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess
indicated in the invoice. (2) The amount deducted as tax under this section shall be paid to the
Government by the deductor within ten days after the end of the month in which such deduction is
made, in such manner as may be prescribed. (3) [A certificate of tax deduction at source shall be issued
in such form and in such manner as may be prescribed.] (5) The deductee shall claim credit, in his
electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under
sub-section (3) of section 39, in such manner as may be prescribed. (6) If any deductor fails to pay to the
Government the amount deducted as tax under subsection (1), he shall pay interest in accordance with
the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted. (7) The
determination of the amount in default under this section shall be made in the manner specified in
section 73 or section74. (8) The refund to the deductor or the deductee arising on account of excess or
erroneous deduction shall be dealt with in accordance with the provisions of section 54: Provided that
no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic
cash ledger of the deductee.

Collection of tax at Source ( Section – 52 ):-

(1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator
(hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount
calculated at such rate not exceeding one per cent., as may be notified by the Government on the
recommendations of the Council, of the net value of taxable supplies made through it by other suppliers
where the consideration with respect to such supplies is to be collected by the operator. Explanation. ––
For the purposes of this sub-section, the expression “net value of taxable supplies” shall mean the
aggregate value of taxable supplies of goods or services or both, other than services notified under sub-
section (5) of section 9, made during any month by all registered persons through the operator reduced
by the aggregate value of taxable supplies returned to the suppliers during the said month. (2) The
power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode of
recovery from the operator. (3) The amount collected under sub-section (1) shall be paid to the
Government by the operator within ten days after the end of the month in which such collection is
made, in such manner as may be prescribed. (4) Every operator who collects the amount specified in
sub-section (1) shall furnish a statement, electronically, containing the details of outward supplies of
goods or services or both effected through it, including the supplies of goods or services or both
returned through it, and the amount collected under sub-section (1) during a month, in such form and
manner as may be prescribed, within ten days after the end of such month. [Provided that the
Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for
furnishing the statement for such class of registered persons as may be specified therein: Provided
further that any extension of time limit notified by the Commissioner of State tax or the Commissioner
of Union territory tax shall be deemed to be notified by the Commissioner] 3[Explanation. —For the
purposes of this sub-section, it is hereby declared that the due date for furnishing the said statement for
the months of October, November and December, 2018 shall be the [7 th February, 2019]] (5) Every
operator who collects the amount specified in sub-section (1) shall furnish an annual statement,
electronically, containing the details of outward supplies of goods or services or both effected through
it, including the supplies of goods or services or both returned through it, and the amount collected
under the said sub-section during the financial year, in such form and manner as may be prescribed,
before the thirty first day of December following the end of such financial year. [Provided that the
Commissioner may, on the recommendations of the Council and for reasons to be recorded in writing,
by notification, extend the time limit for furnishing the annual statement for such class of registered
persons as may be specified therein: Provided further that any extension of time limit notified by the
Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by
 ---47---

the Commissioner.] (6) If any operator after furnishing a statement under sub-section (4) discovers any
omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or
enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the
statement to be furnished for the month during which such omission or incorrect particulars are
noticed, subject to payment of interest, as specified in sub-section (1) of section 50: Provided that no
such rectification of any omission or incorrect particulars shall be allowed after the [thirtieth day of
November due date for furnishing of statement for the month of September] following the end of the
financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier. (7)
The supplier who has supplied the goods or services or both through the operator shall claim credit, in
his electronic cash ledger, of the amount collected and reflected in the statement of the operator
furnished under sub-section (4), in such manner as may be prescribed. (8) The details of supplies
furnished by every operator under sub-section (4) shall be matched with the corresponding details of
outward supplies furnished by the concerned supplier registered under this Act in such manner and
within such time as may be prescribed. (9) Where the details of outward supplies furnished by the
operator under sub-section (4) do not match with the corresponding details furnished by the supplier
under [section 37 or section 39], the discrepancy shall be communicated to both persons in such
manner and within such time as may be prescribed. (10) The amount in respect of which any
discrepancy is communicated under sub-section (9) and which is not rectified by the supplier in his valid
return or the operator in his statement for the month in which discrepancy is communicated, shall be
added to the output tax liability of the said supplier, where the value of outward supplies furnished by
the operator is more than the value of outward supplies furnished by the supplier, in his return for the
month succeeding the month in which the discrepancy is communicated in such manner as may be
prescribed. (11) The concerned supplier, in whose output tax liability any amount has been added under
sub-section (10), shall pay the tax payable in respect of such supply along with interest, at the rate
specified under sub-section (1) of section 50 on the amount so added from the date such tax was due till
the date of its payment. (12) Any authority not below the rank of Deputy Commissioner may serve a
notice, either before or during the course of any proceedings under this Act, requiring the operator to
furnish such details relating to— (a) supplies of goods or services or both effected through such
operator during any period; or (b) stock of goods held by the suppliers making supplies through such
operator in the godowns or warehouses, by whatever name called, managed by such operator and
declared as additional places of business by such suppliers, as may be specified in the notice. (13) Every
operator on whom a notice has been served under sub-section (12) shall furnish the required
information within fifteen working days of the date of service of such notice. (14) Any person who fails
to furnish the information required by the notice served under sub-section (12) shall, without prejudice
to any action that may be taken under section 122, be liable to a penalty which may extend to twenty-
five thousand rupees [(15) The operator shall not be allowed to furnish a statement under sub-section
(4) after the expiry of a period of three years from the due date of furnishing the said statement:
Provided that the Government may, on the recommendations of the Council, by notification, subject to
such conditions and restrictions as may be specified therein, allow an operator or a class of operators to
furnish a statement under sub-section (4), even after the expiry of the said period of three years from
the due date of furnishing the said statement.] Explanation. —For the purposes of this section, the
expression “concerned supplier” shall mean the supplier of goods or services or both making supplies
through the operator