GST Audit & Investigation

DGGI (Directorate General of GST Intelligence) investigates: fake invoice networks (circular trading — ITC without actual supply), IGST refund frauds on bogus exports, GST registration fraud using PAN/Aadhaar without the person's knowledge, and high-value unexplained ITC claims. Intelligence triggers: GSTN data analytics, ICEGATE export refund data, bank transaction data, and tip-offs. Searches are authorised under Section 67.

Section 67: an officer authorised by a Joint Commissioner or above can search business premises, seize documents and goods liable to confiscation. Section 70: officers can summon any person to appear and give evidence. Section 132: arrest (with warrant) is possible for offences like fraudulent ITC availing or circular trading exceeding ₹5 crore — cognisable and non-bailable offences. The taxpayer has the right to have legal counsel present during search — assert this immediately.

Section 132: imprisonment and fine for: issuing invoices without actual supply — up to 5 years; fraudulent ITC availing above ₹5 crore — up to 5 years; collecting GST but not paying to the government — up to 5 years; obstruction of officer — up to 1 year. For ₹1–5 crore: up to 3 years. For below ₹1 crore: up to 1 year. These are in addition to civil tax demands and penalties under Section 73/74.

Section 138: an officer not below the Commissioner can allow compounding on application, for payment of compounding fees (25–150% of tax involved depending on the offence). Not available for: persons convicted previously under GST/IGST, or for offences involving counterfeit documents or amounts above ₹5 crore for certain categories. Compounding ends criminal proceedings but does not affect civil tax/penalty demands.

Immediately: do not provide documents without a proper panchnama (seizure memo) under Rule 139. Do not make voluntary statements under Section 70 without legal counsel. Post-search: the CA prepares a detailed response to summons — mapping ITC claims to supplier GSTR-1 filings, verifying actual delivery with e-way bills/lorry receipts/bank payments. Voluntary payment before the Show Cause Notice reduces the Section 74 penalty from 100% to 15%.