Breaking Down the Latest DGGI Guidelines: Essential Updates on GST Investigations and Summons

Recently, the Directorate General of GST Intelligence (DGGI) has released comprehensive guidelines governing investigative procedures in select cases. These guidelines, encapsulated in an operational framework, prioritize the facilitation of business transactions for taxpayers and assessees. (Reference: F.No. DGGI/17/2023-INV-O/o Pr DG-DGGI-HQ-DELHI(1) dated 08.02.2024, issued by DGGI, New Delhi)

With nationwide coverage extending from its headquarters to 26 Zonal Units (ZU) and 40 Regional Units (RU), the officers of the Directorate General of GST Intelligence (DGGI) operate under an all-India jurisdiction. This jurisdiction is pivotal to their role in overseeing compliance within the Goods and Services Tax (GST) and Central Excise frameworks. Under the ambit of GST, investigations may be conducted either by the DGGI, jurisdictional CGST formations, or the respective State authorities.

Understanding The Background:

The provisions pertaining to inspection, search, and seizure (Sections 122 to 138) within the GST Law are fortified with robust safeguards. According to the stipulations of the GST Law, any search of a business establishment or similar premises can only be conducted under the authorization of an officer not below the rank of Joint Commissioner, and contingent upon reasonable grounds for suspicion.

The term “inspection,” as delineated within common understanding, represents a procedural step gentler in nature than a formal search. It furnishes officers with the authority to access any business premises, as well as those involved in the transportation or storage of goods, including warehouses or godowns. However, such inspections may only be initiated by an officer of the CGST/SGST following written authorization from a supervisory officer of Joint Commissioner rank or above.

In the realm of taxation administration, provisions for arrests are established to address circumstances instigated by unscrupulous tax evaders. While such measures may be perceived as stringent by some, they are imperative for ensuring the efficacy of tax administration, serving as both a deterrent and a means to instill discipline.

The provisions governing arrests under the GST Law incorporate robust safeguards to ensure their judicious application, requiring authorization from the Commissioner. Additionally, arrests may only be effectuated in cases where an individual is implicated in offenses specifically designated for arrest purposes, and where the quantum of tax involved surpasses a prescribed threshold.

Section 69 of the CGST Act confers authority upon the Commissioner of CGST or SGST to apprehend any individual upon reasonable belief that said individual has committed an offense delineated under section 132(1)(a, b, c, d) and punishable pursuant to section 132(1)(i, ii) or 131(2).

In matters of summons, Section 70 of the CGST Act, 2017, empowers the designated officer under the GST Act to conduct inquiries, present evidence, or furnish documents as part of the investigative process. Moreover, Section 71 of the CGST Act, 2017, endows officers not below the rank of Joint Commissioner with the authority to access any registered business premises. This access is granted for the purpose of scrutinizing books of account, documents, computer systems, and other pertinent materials necessary for conducting audits, verifications, and checks aimed at safeguarding revenue interests.

Section 129 of the CGST Act, 2017, in conjunction with Rules 138 to 138E of the CGST Rules, 2017, mandates compliance with e-way bill and tax invoice requisites, encompassing both their generation and preservation. Furthermore, under the CGST Act, 2017, goods may be subject to confiscation under specific circumstances outlined in Section 130. Upon confiscation, ownership of the goods ceases to reside with the initial owner and vests with the government or any other authorized entity. Section 129 delineates provisions pertaining to the detention, seizure, and release of goods and conveyances during transit.

Establishing New Norms:

Recognizing the imperative of ensuring a conducive business environment and mitigating taxpayer grievances, the Central Board of Indirect Taxes and Customs (CBIC) has sanctioned a meticulous Standard Operating Procedure (SOP) for officials of the DGGI. This SOP is meticulously crafted to streamline investigative practices, ensuring adherence to jurisdictional boundaries and expediting the investigative process.

Key provisions within the SOP include directing officials to confine investigations to GST cases within their designated zonal units, bypassing matters within the purview of audits or scrutiny. Additionally, summonses are to be issued with precise details regarding the subject of inquiry and clear timelines, eschewing vague or fragmentary information. This strategic approach aims to bolster efficiency, transparency, and fairness in tax investigations, while fostering a conducive environment for businesses to thrive.

The operational procedure governing the initiation and conduct of investigations under the Directorate General of GST Intelligence (DGGI) encompasses several critical aspects, including:

• Jurisdictional considerations
• Initiation and follow-up procedures
• Summons issuance
• Precautionary measures and specific aspects of investigation
• Grievance redressal mechanisms

Key Highlights of The Guidelines and Standard Operating Procedure (SOP):

1. Role Alignment: Investigations conducted by the DGGI should align with the roles delineated in the DGGI charter, avoiding functions more suited to return scrutiny or audit activities.
2. Responsibility Allocation: Principal ADGs/ADGs of Zonal Units (ZUs) are entrusted with the approval, development of intelligence, execution of searches, and completion of investigations, including subsequent actions in Regional Units (RUs).
3. Jurisdictional Limitations: ZUs are typically precluded from initiating investigations leading to tax demand notices on taxpayers/GSTINs outside their allocated geographical jurisdiction.
4. Inter-Zonal Investigations: Investigations initiated by a ZU within its jurisdiction can extend to registrations (GSTINs) of the same taxpayer across other states without seeking inter-ZU approval.
5. Approval Protocol: Investigations must garner prior approval from Principal ADG/ADG of ZU, except in circumstances necessitating higher officer endorsement, as outlined in the SOP.
6. Summoning Protocol: Summonses must be issued with reasoned approval, detailing the specifics of the inquiry and providing reasonable compliance timelines.
7. Information Relevance: Relevancy and propriety of information sought from regular taxpayers must be documented, ensuring holistic inquiry and preventing piecemeal summoning.
8. Investigative Reporting: Statements and outcomes of questioning and searches must be promptly uploaded within four working days.
9. Collaborative Approach: In cases involving overlapping investigations with other tax authorities, dialogue and coordination among investigating offices are imperative to optimize resource utilization and avoid duplication of efforts.
10. Communication with Entities: Investigations concerning listed companies, PSUs, corporations, or government agencies must involve official correspondence detailing the reasons for investigation and providing a reasonable response timeframe.
11. Timely Conclusion: Investigations must be concluded within a year, with the issuance of show cause notices promptly following investigation closure. Additionally, investigations may be formally concluded if no objectionable findings are unearthed.

These guidelines represent the latest iteration, superseding prior versions dated 18.09.2023 as amended on 08.12.2023. Furthermore, the Central Board of Indirect Taxes and Customs (CBIC) has recently issued additional directives on the subject matter. These new guidelines are detailed in Instruction No. 01/2023-24 GST (Inv.) dated 30.03.2024, disseminated by the Ministry of Finance, Department of Revenue.