Inspection & Arrest Under GST | GST Penalty and GST Offences – Kinja Consultancy


Inspection & Arrest Under GST

The Joint Commissioner of SGST/CGST (or a higher officer) may have reasons to believe that in order to evade tax, a person has suppressed any transaction or claimed excess input tax credit etc. Then the Joint Commissioner can authorize any other officer of CGST/SGST (in writing) to inspect places of business of the suspected evader.

The Joint Commissioner of SGST/CGST can order for a Search. He will order a search on the basis of results of inspection (or other reason) if he has reasons to believe

  • There are goods which might be confiscated
  • Any documents or books or other things which are hidden somewhere. Such items can be useful during proceedings.

Such incriminating goods and documents can be Seized

Goods in Transit 

The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to carry the following documents:

  • Invoice or Bill of Supply or delivery challan
  • Copy of E Way Bill (hard copy or via RFID)

The proper officer has the power to intercept Goods in Transit and inspect the goods and the documents.

If the goods are in contravention to the GST Act then the goods, related documents, and the vehicle carrying them will be seized. The goods will be released only on payment of tax and penalty.

Before confiscating the goods, the tax officer shall give an option of paying a fine instead of confiscation.

Compounding of Offences Under GST

Compounding of Offenses is a shortcut method to avoid litigation. In case of Prosecution for an offense in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. This becomes expensive and time-consuming.

 In compounding, the accused is not required to appear personally and can be discharged on payment of compounding fee which cannot be more than the maximum fine as applicable under GST.

Compounding will save time and money. However, Compounding Under GST is not available for cases where the value involved exceeds 1 crore.

Prosecution Under GST 

The prosecution is conducting of legal proceedings against someone in respect of a criminal charge.

A person committing an offense with the deliberate intention of fraud, becomes liable to Prosecution Under GST i.e., face criminal charges. A few examples of these offenses are-

  1. Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
  2. Obtaining refund of any CGST/SGST by fraud.
  3. Submitting fake financial records/documents or files, and fake returns to evade tax.
  4. Helping another person to commit fraud under GST.

Arrest Under GST

If the Commissioner of CGST/SGST believes a person has committed a certain offense he can be Arrested under GST by any authorized CGST/SGST officer (click here for the List of Offenses for Which One can be Arrested)

The arrested person will be informed of the grounds for his arrest. He will appear before the magistrate within 24 hours in case of a cognizable offense (Cognizable offenses are those where the police can arrest a person without an arrest warrant. They are serious crimes like murder, robbery, counterfeiting).


A person unhappy with any decision or order passed against him under GST can Appeals against such decision.

The first appeal against an order by an adjudicating authority goes to  the First Appellate Authority

If the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.


To avoid the long process of appeal and litigation, a taxpayer may request for the Advance Ruling under GST The taxpayer asks for clarification from GST authorities on GST treatment before starting the proposed activity. The tax authority gives a written decision (called advance ruling) to the applicant on the query.