Section 67 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the power of inspection, search and seizure. It is one of the important provisions in Chapter XIV of the CGST Act, which covers inspection, search, seizure and arrest.
Section 67 gives specified GST authorities the power to inspect business premises and, where the statutory conditions are satisfied, search and seize goods, books, documents and other relevant things. The provision is intended to help the tax administration detect cases involving suppression of transactions, unaccounted stock, excessive input tax credit, tax evasion and other contraventions of the GST law.
At the same time, Section 67 contains several procedural safeguards. The power to authorise inspection or search is linked to the officer’s reasons to believe, written authorisation requirements, rules concerning retention and return of documents, provisional release of seized goods, time limits for issuing notices after seizure, and other prescribed procedures.
What is Section 67 of the CGST Act?
Section 67 authorises the GST authorities to conduct:
- Inspection of specified places
- Search of places where relevant goods, books, documents or things are believed to be concealed
- Seizure of goods liable to confiscation
- Seizure of documents, books or things useful or relevant to proceedings
- Seizure of certain records produced before the officer where tax evasion is suspected
- Test purchases to verify whether tax invoices or bills of supply are being issued correctly
The powers are not identical in every situation. Inspection, search and seizure are separate concepts, and different statutory conditions apply to each.
Section 67 should also be distinguished from Section 68, which deals specifically with inspection of goods in movement, and Section 71, which deals with access to business premises for audit, scrutiny, verification and checks.
Who Can Authorise Inspection Under Section 67?
Under Section 67(1), the proper officer not below the rank of Joint Commissioner must have reasons to believe that the circumstances specified in the Act exist.
The Joint Commissioner or higher-ranking proper officer may then authorise, in writing, another officer of central tax to inspect the relevant place.
The same basic rank requirement applies to the authorisation of search and seizure under Section 67(2).
Therefore, an ordinary GST officer does not independently exercise the statutory authorisation power merely because an inspection or search is considered desirable. The Act specifically places the authorisation power with a proper officer not below the rank of Joint Commissioner.
When Can GST Inspection Be Conducted?
Section 67(1) provides specific circumstances in which inspection may be authorised.
The proper officer must have reasons to believe that either of the following situations exists.
1. Suppression or Contravention by a Taxable Person
The officer may act where there is reason to believe that a taxable person:
- Has suppressed a transaction relating to supply of goods or services;
- Has suppressed the stock of goods in hand;
- Has claimed input tax credit in excess of entitlement; or
- Has contravened provisions of the CGST Act or Rules in a manner intended to evade tax.
These circumstances provide the statutory basis for inspection of places of business or other relevant places.
2. Goods or Records Connected With Tax Evasion
Inspection can also be authorised where a person involved in transporting goods, or an owner or operator of a:
- Warehouse;
- Godown; or
- Other place
is believed to be keeping goods on which tax has escaped payment or maintaining accounts or goods in a manner likely to cause tax evasion.
The provision therefore extends beyond the registered taxpayer’s own premises in appropriate cases.
What Does “Reasons to Believe” Mean?
The expression “reasons to believe” is important because Section 67 does not simply provide an unrestricted power to inspect or search any business at any time.
The proper officer must have reasons to believe that the statutory circumstances exist.
This requirement is different from merely having a general suspicion that a taxpayer may have made an error.
The reasons form the statutory foundation for exercising the inspection, search or seizure powers. The law also requires the relevant authorisation to be in writing where Section 67(1) or 67(2) authorisation is being given.
What Places Can Be Inspected?
Depending on the circumstances covered by Section 67(1), inspection may cover:
- Places of business of a taxable person;
- Places connected with transportation of goods;
- Warehouses;
- Godowns;
- Other relevant places.
The precise scope depends on the reasons to believe and the written authorisation issued under the Act.
What is the Difference Between Inspection and Search?
Inspection and search are related but different powers.
Inspection
Inspection is primarily a power to enter and examine a specified place for the purposes contemplated by Section 67(1).
For example, if the department has reason to believe that a taxable person is suppressing transactions or stock, the authorised officer may inspect the relevant business premises.
Search
Search is a more intrusive power.
Under Section 67(2), where the proper officer has reasons to believe that:
- Goods liable to confiscation; or
- Documents, books or things useful or relevant to proceedings
are secreted in any place, the officer may authorise a search and seizure or conduct the search and seizure himself.
Thus, the statutory threshold and circumstances under Section 67(2) are specifically connected with goods, documents, books or things believed to be concealed.
When Can GST Authorities Conduct a Search?
Section 67(2) applies where the proper officer not below the rank of Joint Commissioner has reasons to believe that certain goods, documents, books or things are secreted in a place.
The officer may arrive at this belief:
- Following an inspection under Section 67(1); or
- Otherwise, based on information or material available to the department.
If the statutory conditions are satisfied, the officer may:
- Conduct the search himself; or
- Authorise another central tax officer in writing to conduct the search and seizure.
The goods, documents, books or things must fall within the scope specified in Section 67(2).
What Can Be Seized Under Section 67?
Section 67(2) permits seizure of:
- Goods liable to confiscation;
- Documents;
- Books; or
- Things
where the proper officer has reasons to believe that they are secreted in a place and are useful for or relevant to proceedings under the Act.
Therefore, seizure is not limited only to physical goods. Relevant business records and other things can also come within the provision.
Because the definition of “document” under the CGST Act includes electronic records, the concept of documents under GST is not restricted to traditional paper records.
What Happens When Goods Cannot Be Physically Seized?
Section 67(2) recognises that physically removing certain goods may not always be practicable.
Where it is not practicable to seize the goods, the proper officer or authorised officer may serve an order on the owner or custodian directing that the goods must not be:
- Removed;
- Parted with; or
- Otherwise dealt with
without prior permission of the officer.
This effectively restricts the person’s ability to deal with the goods while they remain in the custody of the owner or custodian.
Under Rule 139, such an order of prohibition is issued in FORM GST INS-03. The same rule also provides for entrusting custody of seized goods or things to the owner or custodian for safe upkeep in appropriate cases.
What is Form GST INS-01?
Rule 139 provides the prescribed procedure for inspection, search and seizure.
Where the proper officer not below the rank of Joint Commissioner has reasons to believe that a place is required to be visited for inspection, search or seizure under Section 67, the officer issues an authorisation in FORM GST INS-01 authorising a subordinate officer to conduct the relevant action.
Thus:
INS-01 → Authorisation for inspection/search/seizure
This is different from the seizure order and other forms used during the subsequent stages.
What is Form GST INS-02?
Where goods, documents, books or things are liable to seizure under Section 67(2), the proper officer or authorised officer makes the seizure order in FORM GST INS-02.
Therefore:
INS-02 → Order of seizure
Rule 139 also requires the officer seizing goods, documents, books or things to prepare an inventory containing relevant particulars such as description, quantity or unit and, where applicable, make, mark or model. The inventory is to be signed by the person from whom the items are seized.
Can Seized Goods Be Released Provisionally?
Yes.
Section 67(6) provides for provisional release of goods seized under Section 67(2).
The seized goods may be released provisionally upon:
- Execution of a bond; and
- Furnishing of security
in the prescribed manner and prescribed amount.
Alternatively, release can occur on payment of the applicable:
- Tax;
- Interest; and
- Penalty,
as the case may be.
Rule 140 provides that provisional release is made upon execution of FORM GST INS-04 and furnishing of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable.
Example
Suppose goods are seized during a GST search and the taxpayer wants them released before the proceedings are finally concluded.
Subject to the applicable statutory requirements, provisional release may be obtained by executing the prescribed bond and furnishing the required security.
The provisional release of the goods does not by itself determine the final tax liability.
What Happens to Documents Seized During Search?
Section 67(2) contains an important limitation regarding retention.
Documents, books or things seized may be retained only for as long as necessary for:
- Their examination; and
- Any inquiry or proceedings under the CGST Act.
The law therefore does not provide that every seized document can be retained indefinitely without reference to its relevance to the proceedings.
When Must Documents Be Returned?
Section 67(3) provides that documents, books or things seized under Section 67(2), as well as other documents, books or things produced by the taxpayer or another person, which have not been relied upon for the issue of a notice under the Act or Rules, must be returned.
The statutory time limit is:
Within 30 days of the issue of the notice.
This provision is important because it establishes a specific return mechanism for records that have not been relied upon for issuing the relevant notice.
Can GST Officers Break Open a Door or Locker?
Section 67(4) specifically provides powers in situations where access is denied.
An officer authorised under Section 67(2) may:
- Seal premises;
- Break open the door of premises;
- Break open an almirah;
- Break open an electronic device;
- Break open a box; or
- Break open another receptacle
where goods, accounts, registers or documents are suspected to be concealed and access is denied.
The power is therefore linked to an authorised search and denial of access. It is not a general power to break open any premises without the statutory basis required by Section 67.
Can the Taxpayer Make Copies of Seized Documents?
Yes.
Section 67(5) provides that the person from whose custody documents are seized is entitled to:
- Make copies of the documents; or
- Take extracts from them.
This must be done in the presence of an authorised officer and at the place and time indicated by that officer.
However, there is an exception where the proper officer considers that allowing copies or extracts may prejudicially affect the investigation.
Therefore, the right to make copies exists subject to the statutory exception provided by Section 67(5).
Six-Month Time Limit After Seizure of Goods
Section 67(7) contains an important time limit.
Where goods are seized under Section 67(2), and no notice in respect of those goods is given within six months of the seizure, the goods must be returned to the person from whose possession they were seized.
However, the proper officer may extend this period by a further period of not exceeding six months, if sufficient cause is shown.
Therefore, the basic framework is:
Initial period: 6 months
Possible extension: up to another 6 months
Potential maximum: 12 months
The extension is not unlimited and is subject to the statutory requirement of sufficient cause.
Example
Suppose goods are seized on 1 April.
If no notice concerning those goods is issued within the statutory six-month period, the goods are ordinarily required to be returned.
Where sufficient cause exists, the proper officer may extend the period by up to another six months.
Special Treatment of Perishable and Hazardous Goods
Section 67(8) recognises that certain goods cannot practically be stored for long periods because of:
- Their perishable nature;
- Their hazardous nature;
- Depreciation in value over time;
- Storage-space constraints; or
- Other relevant considerations.
The Government may notify goods or classes of goods that should be disposed of as soon as possible after seizure.
Section 67(9) requires the proper officer to prepare an inventory of such notified goods when they are seized.
Rule 141 provides a specific mechanism for seized perishable or hazardous goods.
Where the taxable person pays the lower of:
- The market price of the goods or things; or
- The amount of tax, interest and penalty that is or may become payable,
the goods or things are released forthwith through FORM GST INS-05, upon proof of payment.
If the required amount is not paid, the proper officer may dispose of the goods or things and adjust the amount realised against the tax, interest, penalty or other amount payable.
Application of Criminal Procedure Rules to GST Search and Seizure
Section 67(10) provides that the provisions of the Code of Criminal Procedure, 1973, relating to search and seizure apply, so far as may be, to search and seizure under Section 67, subject to the modification specified in the provision.
In particular, Section 165(5) of the Code of Criminal Procedure is to operate as though the reference to “Magistrate” were substituted by “Commissioner” for the purposes specified in Section 67(10).
Thus, Section 67 does not operate in complete isolation from procedural law concerning search and seizure.
Seizure of Accounts and Documents Produced Before the Officer
Section 67(11) deals with another situation that is different from a search under Section 67(2).
Where the proper officer has reasons to believe that a person:
- Has evaded tax; or
- Is attempting to evade payment of tax,
the officer may record reasons in writing and seize the accounts, registers or documents produced before him.
The officer must provide a receipt for the seized records.
Such records may be retained for as long as necessary in connection with proceedings under the Act or Rules for prosecution.
Test Purchase Under Section 67(12)
Section 67(12) gives the Commissioner or an officer authorised by him the power to cause a person authorised by him to purchase goods or services from the business premises of a taxable person.
The purpose is to check whether the taxable person is correctly issuing:
- Tax invoices; or
- Bills of supply.
After the goods purchased by the authorised person are returned, the taxable person or person in charge of the premises must refund the amount paid for those goods after cancelling the tax invoice or bill of supply that was issued earlier.
This mechanism is commonly described as a test purchase or purchase verification exercise.
Example of a Test Purchase
Suppose a retail business is suspected of not issuing proper GST invoices.
An authorised person may purchase goods from the business under the authority contemplated by Section 67(12).
The department can then verify:
- Whether an invoice was issued;
- Whether a bill of supply was issued;
- Whether the correct document was issued;
- Whether the transaction was properly recorded.
The purchased goods can subsequently be returned and the amount paid can be refunded after cancellation of the document issued for the purchase, as provided by the law.
Section 67 and Electronic Records
GST compliance is increasingly electronic, and Section 67 is not limited to paper records.
The CGST Act defines “document” broadly enough to include electronic records. The search provisions also expressly refer to electronic devices in the context of breaking open an electronic device where access is denied.
Accordingly, depending on the circumstances and statutory authorisation, relevant electronic records and devices can form part of the examination during GST proceedings.
Section 67 and Business Premises
Section 67 can apply to more than the taxpayer’s principal place of business.
Depending on the statutory circumstances, the relevant places may include:
- Registered business premises;
- Other business locations;
- Warehouses;
- Godowns;
- Places connected with transportation;
- Other places where relevant goods, books, documents or things are believed to be kept.
The exact scope depends upon the statutory grounds and the written authorisation.
Difference Between Inspection, Search and Seizure
These three terms are often used together, but they have different meanings.
| Term | Basic meaning under Section 67 |
|---|---|
| Inspection | Examination of specified places where the statutory conditions under Section 67(1) are satisfied |
| Search | Examination of a place where goods, documents, books or things are believed to be secreted |
| Seizure | Taking custody/control of goods, documents, books or things covered by the statutory seizure power |
| Prohibition order | Restriction on dealing with goods when physical seizure is not practicable |
| Provisional release | Temporary release of seized goods subject to prescribed conditions |
The distinction is important because the conditions and consequences differ between these powers.
Section 67 vs Section 65 Audit
Section 65 deals with audit by tax authorities, while Section 67 deals with inspection, search and seizure.
| Particular | Section 65 | Section 67 |
|---|---|---|
| Main purpose | Audit and verification of GST compliance | Detection and investigation of specified contraventions and tax-evasion situations |
| Nature | Audit | Inspection/search/seizure |
| Notice | At least 15 working days before audit | Section 67 does not prescribe a similar advance notice requirement for search |
| Main authority | Commissioner or authorised officer | Proper officer not below Joint Commissioner for statutory authorisation |
| Written authorisation | Audit authorisation framework | Written authorisation for inspection/search by another officer |
| Seizure power | No general seizure power under Section 65 itself | Express seizure power under Section 67(2) |
| Relevant forms | ADT-01/ADT-02 | INS-01 onwards |
A Section 65 audit is therefore not the same thing as a Section 67 search.
Section 67 vs Section 66 Special Audit
Section 66 provides for a special audit by a Chartered Accountant or Cost Accountant nominated by the Commissioner.
Section 67 provides powers of inspection, search and seizure to GST authorities.
| Particular | Section 66 | Section 67 |
|---|---|---|
| Main purpose | Special professional examination of records | Inspection/search/seizure |
| Professional | CA or Cost Accountant nominated by Commissioner | GST officers |
| Trigger | Specified concerns during scrutiny, inquiry, investigation or other proceedings | Statutory reasons to believe concerning suppression, evasion, concealed goods/documents etc. |
| Main form | ADT-03 | INS-01 and related forms |
| Seizure power | No seizure power merely from Section 66 | Express seizure power |
What Should a Taxpayer Do During a GST Search?
When GST authorities conduct an inspection or search, the taxpayer should remain organised and ensure that the proceedings are handled properly.
Practical steps include:
1. Verify the Authorisation
Where a search or inspection is being conducted under Section 67, the taxpayer should note the relevant authorisation and officer details.
2. Cooperate With the Proceedings
The taxpayer should not obstruct lawful proceedings.
3. Keep Records Available
Relevant books, invoices, registers and electronic records should be identified and produced as required.
4. Maintain an Inventory of Seized Items
The taxpayer should carefully review the inventory prepared by the officer and ensure that the details of seized goods, documents and other things are accurately recorded.
5. Obtain Copies Where Permitted
Section 67(5) provides a statutory right to make copies or take extracts of seized documents, subject to the investigation-related exception.
6. Preserve a Record of the Proceedings
The business should maintain copies of relevant orders, inventories, receipts and other documents supplied during the proceedings.
7. Seek Professional Advice Where Necessary
Where the search involves substantial records, complex transactions or significant potential tax exposure, professional legal or tax advice can help the taxpayer understand the proceedings and respond appropriately.
Does Seizure Mean the Goods Are Confiscated?
No.
Seizure and confiscation are different concepts.
Seizure under Section 67 involves taking custody or control of goods, documents, books or things under the statutory power.
Confiscation is a separate legal consequence that may arise under the applicable provisions of the GST law after the relevant statutory proceedings.
Therefore, the seizure of goods does not by itself mean that ownership has been finally confiscated.
Does Seizure Automatically Establish Tax Liability?
No.
A search or seizure is part of the investigative and enforcement framework.
The ultimate tax liability depends on the facts, records, applicable provisions and subsequent proceedings.
For example, the department may seize documents because they are considered relevant to determining the correct tax position. The final tax liability, if any, must be dealt with under the applicable provisions of the GST law.
Important Documents and Forms Under Section 67
The major forms and documents connected with inspection, search and seizure include:
| Form | Purpose |
|---|---|
| GST INS-01 | Authorisation for inspection, search or seizure |
| GST INS-02 | Order of seizure |
| GST INS-03 | Order of prohibition where goods cannot practically be seized |
| GST INS-04 | Bond for provisional release of seized goods |
| GST INS-05 | Release order for perishable or hazardous seized goods |
Rule 139 specifically provides the framework for INS-01, INS-02 and INS-03, while Rule 140 deals with provisional release and Rule 141 deals with perishable or hazardous seized goods.
Important Time Limits Under Section 67
Some of the important statutory periods under Section 67 are:
| Matter | Time limit |
|---|---|
| Return of documents not relied upon for notice | Within 30 days of issue of the notice |
| Return of seized goods if no notice is issued | Six months from seizure |
| Possible extension of period for seized goods | Further period up to six months |
| Retention of seized documents | Only as long as necessary for examination, inquiry or proceedings |
| Provisional release | Subject to prescribed bond/security or payment conditions |
These time limits should be understood in the context of the exact statutory provision and the circumstances of the case.
Key Points of Section 67
The most important points of Section 67 can be summarised as follows:
- Section 67 deals with inspection, search and seizure under GST.
- It is contained in Chapter XIV of the CGST Act.
- Inspection can be authorised where the statutory conditions relating to suppression, excessive ITC, contravention or possible tax evasion are satisfied.
- A proper officer not below the rank of Joint Commissioner exercises the statutory authorisation power.
- The officer must have reasons to believe as required by the relevant subsection.
- Inspection may cover specified business premises, warehouses, godowns and other relevant places.
- Search can be authorised where goods liable to confiscation or relevant documents, books or things are believed to be secreted.
- Written authorisation is required where the Act provides for authorisation of another officer.
- Goods that cannot practically be seized may be placed under a prohibition order.
- Seized goods can be provisionally released subject to the prescribed conditions.
- Documents and records should not be retained longer than necessary for their examination or relevant proceedings.
- Documents not relied upon for issuing the relevant notice must be returned within the statutory period.
- Officers have specified powers to seal or break open premises and receptacles where access is denied during an authorised search.
- The person from whose custody documents are seized generally has a right to make copies or take extracts, subject to the statutory investigation-related exception.
- Goods seized under Section 67(2) are subject to the six-month notice period, with a possible further extension of up to six months for sufficient cause.
- Special procedures apply to perishable and hazardous goods.
- Section 67 also permits authorised test purchases to verify the issue of tax invoices or bills of supply.
- Section 67 is different from departmental audit under Section 65 and special audit under Section 66.
Conclusion
Section 67 of the CGST Act, 2017 provides GST authorities with important enforcement powers relating to inspection, search and seizure. These powers can be used in specified circumstances where the proper officer has the required reasons to believe that transactions, stock, input tax credit, goods, accounts or other records are connected with tax evasion or other contraventions covered by the provision.
The law distinguishes between inspection and search, and seizure is subject to specific statutory requirements. A proper officer not below the rank of Joint Commissioner plays a central role in authorising inspection or search, and written authorisation is required where another officer is authorised to conduct the action.
Section 67 also contains safeguards concerning seized documents and goods. Documents may be retained only as long as necessary for examination, inquiry or proceedings, and documents not relied upon for issuing a notice are required to be returned within the statutory period. Taxpayers are also given a statutory opportunity to make copies or extracts of seized documents, subject to the investigation-related exception.
For seized goods, the law provides mechanisms for provisional release, while special provisions apply to perishable and hazardous goods. The six-month period for issuing a notice after seizure, together with the possible further six-month extension for sufficient cause, is another important safeguard.
For businesses, maintaining complete books of account, accurate invoices, stock records, ITC documentation and electronic records is particularly important because these records may become relevant during GST enforcement proceedings. Section 67 should therefore be understood not merely as a search-and-seizure provision but as part of the wider GST compliance and enforcement framework.
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