Section 67 – Inspection, Search and Seizure Under GST: Procedure, Powers, Rights and Compliance Guide

GST Search or Inspection Notice Received? Understand Your Rights and Compliance Requirements

GST authorities have various powers to verify whether businesses are complying with GST laws correctly.

While regular scrutiny, audit, and assessment procedures focus on reviewing records and returns, certain situations involving suspected tax evasion may require stronger verification measures.

For such cases, GST law provides powers of inspection, search, and seizure under Section 67 of the CGST Act, 2017.

Section 67 authorises GST officers to inspect business premises, conduct searches, and seize goods, documents, books, or other relevant items when specific legal conditions are satisfied.

These powers are generally used in cases involving concerns such as:

• Suppression of taxable transactions.
• Excessive Input Tax Credit claims.
• Undisclosed stock.
• Goods stored without proper tax payment.
• Records maintained in a manner indicating possible tax evasion.

A GST inspection, search, or seizure proceeding can be a serious compliance matter for businesses because it involves physical verification of premises, records, goods, and digital information.

However, receiving a GST search or inspection does not automatically mean that the taxpayer has committed an offence.

The department must follow prescribed procedures, and taxpayers have specific rights during such proceedings.

This detailed guide explains:

• Meaning of Section 67 GST.
• Difference between inspection, search, and seizure.
• When GST officers can conduct inspection.
• GST search procedure.
• Seizure of goods and documents.
• GST INS-01 authorisation.
• GST INS-02 seizure order.
• Rights and responsibilities of taxpayers.
• Documents to maintain.
• Practical examples.
• Compliance checklist.
• FAQs.

What Is Section 67 of GST Act?

Section 67 of the CGST Act deals with the power of inspection, search, and seizure under GST.

It allows the proper officer to take action when there are reasonable grounds to believe that a person has:

• Suppressed transactions.
• Hidden stock.
• Claimed excess Input Tax Credit.
• Violated GST provisions to evade tax.
• Possessed goods on which tax has not been paid.

The provision is part of Chapter XIV of the CGST Act, which covers:

• Inspection.
• Search.
• Seizure.
• Arrest.

The objective of Section 67 is to enable authorities to collect evidence and prevent tax evasion while ensuring that legal safeguards are followed.

Difference Between GST Inspection, Search and Seizure

Many businesses use these terms interchangeably, but they have different meanings under GST law.

GST Inspection

Inspection is a verification process where authorised GST officers examine:

• Business premises.
• Goods.
• Documents.
• Records.

Inspection is generally the first level of physical verification.

It allows officers to check whether there are indications of GST violations.

GST Search

Search is a more extensive action where officers look for:

• Hidden goods.
• Documents.
• Books of accounts.
• Electronic records.

A search is conducted when the officer has reasons to believe that relevant material is concealed at a particular place.

GST Seizure

Seizure means taking possession or control of:

• Goods.
• Documents.
• Books of accounts.
• Other relevant items.

Seized items may be retained only for the period necessary for examination, inquiry, or proceedings under GST law.

When Can GST Department Conduct Inspection Under Section 67?

Inspection under Section 67 can be conducted when the proper officer has reasons to believe that certain GST violations may have occurred.

The officer authorising inspection must generally be not below the rank of Joint Commissioner.

Inspection may be authorised in situations such as:

1. Suppression of Transactions

If a taxable person is suspected of hiding taxable supplies or not reporting actual transactions, inspection may be initiated.

Example:

A business reports annual sales of ₹50 lakh in GST returns, but available information indicates actual sales may be significantly higher.

The department may verify:

• Sales records.
• Invoices.
• Stock details.
• Accounting data.

2. Excess Input Tax Credit Claim

Incorrect ITC claims are one of the major reasons for GST investigations.

Inspection may be conducted where authorities suspect:

• ITC claimed exceeds eligibility.
• Fake invoices are being used.
• Purchases are not genuine.

Example:

A company claims ITC of ₹1 crore but supporting purchase records appear inconsistent.

The department may inspect records to verify the claim.

3. Undisclosed Stock

Inspection may also be conducted where goods appear to be stored without proper tax compliance.

Authorities may examine:

• Physical stock.
• Purchase records.
• Sales records.
• Inventory statements.

4. Goods Stored for Tax Evasion

Inspection can also cover:

• Transporters.
• Warehouses.
• Godowns.
• Other storage locations.

where goods may have escaped tax payment or records are maintained in a manner likely to cause tax evasion.

GST Inspection Authorisation – GST INS-01

The authorisation for inspection is issued through:

FORM GST INS-01

The authorised officer receives written permission to conduct inspection of specified premises.

The authorisation generally identifies:

• Person or premises to be inspected.
• Purpose of inspection.
• Officer authorised to conduct proceedings.

Businesses should carefully verify the authorisation details during inspection proceedings.

GST Search and Seizure Under Section 67(2)

Search and seizure powers are more extensive than inspection powers.

Under Section 67(2), where the proper officer has reasons to believe that:

• Goods liable to confiscation are hidden, or
• Documents, books, or things relevant to GST proceedings are concealed,

the officer may conduct search and seizure proceedings.

The officer may:

• Conduct the search personally.
• Authorise another central tax officer in writing.
• Seize relevant goods or documents.

GST Search Procedure

A GST search generally involves multiple steps.

Step 1: Written Authorisation

Search proceedings require proper authorisation from the competent officer.

The search cannot be conducted without following prescribed legal procedures.

Step 2: Entry Into Premises

The authorised officer visits the specified premises for conducting search proceedings.

The premises may include:

• Registered business place.
• Warehouse.
• Godown.
• Other locations where relevant records or goods may be stored.

Step 3: Examination of Records and Goods

During search, officers may examine:

• Books of accounts.
• Invoices.
• Computer systems.
• Digital records.
• Stock details.

Step 4: Seizure of Relevant Items

If officers find goods, documents, or records relevant to proceedings, they may seize them according to GST provisions.

Where physical seizure of goods is not practical, authorities may issue an order restricting removal or disposal of such goods without permission.

GST INS-02 Seizure Order

Where goods, documents, books, or other items are seized, the seizure order is issued through:

FORM GST INS-02

The seizure process should include proper documentation of seized items.

Authorities are required to prepare an inventory of seized goods wherever applicable.

Seizure of Documents and Books Under GST

During search proceedings, GST officers may seize:

• Account books.
• Registers.
• Invoices.
• Digital records.
• Other documents relevant to proceedings.

However, documents that are not relied upon for proceedings are required to be returned within the prescribed period.

The person from whose custody documents are seized may also have rights regarding making copies or taking extracts, subject to applicable conditions.

Detailed GST Search and Seizure Procedure Under Section 67

GST search and seizure proceedings are serious compliance actions because they involve physical verification of premises, examination of records, and possible seizure of goods or documents.

However, GST officers must follow the prescribed legal procedure before taking such actions.

Under Section 67, search and seizure require the proper officer to have reasons to believe that relevant goods, documents, books, or other things are concealed and may be useful for GST proceedings. The officer authorising such action must generally be not below the rank of Joint Commissioner.

The general process involves the following steps:

Step 1: Formation of Reason to Believe

Before conducting inspection, search, or seizure, the authorised officer must form a reasonable belief based on available information.

The belief may arise due to situations such as:

• Suppression of sales.
• Fake invoice activities.
• Excess ITC claims.
• Undisclosed stock.
• Non-payment of GST.
• Hidden business records.

The belief should be based on relevant facts and material available with the department.

Step 2: Issue of Written Authorisation

The proper officer issues written authorisation for inspection, search, or seizure.

The authorisation generally specifies:

• Premises to be inspected or searched.
• Officer authorised to conduct proceedings.
• Purpose of action.

For search and seizure proceedings, authorisation is issued through FORM GST INS-01.

Step 3: Conducting Search at Business Premises

During search proceedings, GST officers may examine:

• Books of accounts.
• Sales and purchase records.
• Tax invoices.
• Electronic records.
• Computers and digital data.
• Stock registers.
• Other relevant documents.

The search may be conducted at:

• Registered business premises.
• Warehouse.
• Godown.
• Other locations where relevant goods or documents are suspected to be stored.

Step 4: Examination of Electronic Records

In modern businesses, important records are often maintained digitally.

During GST search, officers may examine:

• Accounting software.
• Computer systems.
• Hard drives.
• Digital files.
• Emails or electronic records relevant to proceedings.

Businesses should maintain proper backup and organised digital records to avoid unnecessary complications.

Step 5: Seizure of Goods, Documents or Records

If officers find goods, documents, books, or other items relevant to GST proceedings, they may seize them according to Section 67 provisions.

Seizure may include:

• Physical goods.
• Invoices.
• Registers.
• Books of accounts.
• Digital records.

Where goods cannot practically be seized, the officer may issue an order restricting the owner or custodian from removing, transferring, or dealing with such goods without permission.

GST Panchnama During Search Proceedings

During GST search proceedings, officers generally prepare a Panchnama.

A Panchnama is a written record of the proceedings conducted during search.

It may contain details such as:

• Date and time of search.
• Place of search.
• Persons present.
• Documents examined.
• Goods found.
• Items seized.
• Statements recorded.

Businesses should carefully review the contents before signing any document.

Any incorrect observation should be brought to the attention of officers before signing.

Sealing of Premises, Documents and Electronic Devices

Under Section 67, authorised officers have powers to deal with situations where access is denied.

If access to:

• Premises.
• Almirah.
• Electronic devices.
• Boxes.
• Containers.

is denied, officers may take steps permitted under the law, including breaking open such places where required.

However, such powers must be exercised according to prescribed legal procedures.

Retention Period of Seized Documents and Records

Documents, books, and things seized during GST proceedings are not meant to be retained permanently.

They may be retained only for the period necessary for:

• Examination.
• Inquiry.
• GST proceedings.

Documents or items that are not relied upon for issuing notices or further proceedings are required to be returned within the prescribed period.

Provisional Release of Seized Goods Under GST

Businesses may seek provisional release of seized goods according to applicable GST procedures.

This is especially relevant where:

• Goods are seized during search.
• Business operations are affected.
• Goods are required for commercial activity.

The taxpayer may need to comply with conditions prescribed by authorities for release.

The purpose of provisional release is to balance:

• Protection of government revenue.
• Continuation of business operations.

Rights of Taxpayer During GST Search and Seizure

While GST officers have powers under Section 67, taxpayers also have important rights.

1. Right to Verify Authorisation

Before allowing search proceedings, businesses should verify:

• Identity of officers.
• Search authorisation.
• Details mentioned in documents.

2. Right to Receive Copies of Documents

Taxpayers should maintain copies of:

• Search authorisation.
• Seizure documents.
• Inventory statements.
• Panchnama.

These documents are important for future compliance proceedings.

3. Right to Provide Explanation

During search proceedings, taxpayers can explain:

• Nature of transactions.
• Source of goods.
• Accounting treatment.
• Supporting records.

Proper explanations supported by documents can help avoid incorrect conclusions.

4. Right to Obtain Copies of Seized Records

Where documents are seized, taxpayers may have rights relating to obtaining copies or extracts, subject to applicable conditions.

5. Right to Legal and Professional Assistance

Businesses may seek professional assistance to understand:

• Search proceedings.
• Documents being examined.
• Possible GST implications.

Responsibilities of Taxpayer During GST Search

Businesses should cooperate with authorised officers while protecting their legal rights.

Important responsibilities include:

• Provide access to relevant records.
• Avoid destruction or alteration of documents.
• Provide accurate information.
• Maintain professional communication.
• Preserve copies of important records.

Non-cooperation may create additional compliance complications.

Difference Between Section 65 GST Audit and Section 67 Search and Seizure

Many businesses confuse GST audit and GST search proceedings.

However, both serve different purposes.

Section 65 focuses on verification, while Section 67 is generally used where authorities suspect concealment or evasion.

Difference Between Inspection and Search Under GST

Inspection may lead to search proceedings if further evidence indicates concealment.

Practical Example: GST Search Due to Fake ITC Concerns

ABC Traders claims ITC of ₹2 crore during a financial year.

The GST department notices:

• Purchases from suspicious suppliers.
• Mismatch in purchase records.
• Unusual ITC pattern.

Based on available information, authorities suspect possible fake invoice transactions.

A search is conducted at the business premises.

During proceedings, officers examine:

• Purchase invoices.
• Accounting software.
• Vendor records.
• Tax payment details.

The business provides supporting documents explaining genuine transactions.

The final action depends on verification of records and applicable GST provisions.

Practical Example: Search of Warehouse Due to Undisclosed Stock

XYZ Manufacturing stores goods at a warehouse.

The department receives information that:

• Stock movement is not properly recorded.
• Goods may not have corresponding tax invoices.

A GST inspection is conducted.

During verification, officers compare:

• Physical stock.
• Inventory records.
• Purchase documents.
• Sales records.

If discrepancies are found, further proceedings may follow.

Common Mistakes Businesses Make During GST Search and Seizure Proceedings

GST search and seizure proceedings can become complicated if businesses do not handle them carefully.

Many compliance issues arise because of poor documentation, lack of preparation, or incorrect responses during proceedings.

Businesses should avoid the following mistakes:

1. Not Maintaining Proper GST Records

One of the biggest reasons businesses face difficulties during GST investigation is incomplete documentation.

Businesses should maintain:

• Sales invoices.
• Purchase invoices.
• Stock records.
• E-way bill details.
• GST returns.
• Input Tax Credit records.
• Accounting records.

Proper documentation helps establish the genuineness of transactions during verification.

2. Ignoring Reconciliation Between Books and GST Returns

Differences between accounting records and GST returns can create suspicion during inspection or search proceedings.

Businesses should regularly reconcile:

• Sales register with GSTR-1.
• Tax liability with GSTR-3B.
• Purchase register with GSTR-2B.
• Financial statements with GST turnover.

For example:

Books show turnover of ₹10 crore, but GST returns show ₹8.5 crore.

The difference should be properly explained through:

• Credit notes.
• Exempt supplies.
• Timing differences.
• Accounting adjustments.

3. Using Unverified Input Tax Credit

Incorrect ITC claims are one of the major areas examined during GST investigations.

Businesses should verify:

• Supplier compliance.
• Invoice availability.
• Goods/services receipt.
• ITC eligibility.
• Reconciliation with GST records.

Claiming credit without proper supporting documents can create serious compliance issues.

4. Not Maintaining Stock Records

Businesses dealing with goods should maintain proper inventory records.

Important records include:

• Stock register.
• Purchase details.
• Sales records.
• Warehouse records.

During inspection or search, physical stock may be compared with available records.

Any unexplained difference may require clarification.

5. Signing Documents Without Proper Review

During GST search proceedings, officers may prepare documents such as:

• Panchnama.
• Statements.
• Inventory records.
• Seizure documents.

Businesses should carefully review these documents before signing.

If any information is incorrect, the taxpayer should bring it to the attention of officers.

6. Deleting or Altering Digital Records

Businesses should never delete, modify, or hide records during GST proceedings.

Electronic records can be an important part of investigation.

Attempting to alter records may create additional legal complications.

7. Not Taking Professional Assistance

GST search and seizure proceedings involve technical legal procedures.

Professional assistance can help businesses:

• Understand proceedings.
• Review documents.
• Prepare explanations.
• Protect compliance rights.

How Businesses Can Prepare for GST Inspection, Search and Seizure

A proactive compliance system helps reduce risks associated with GST investigation.

1. Maintain Proper GST Documentation

Businesses should maintain organised records of:

• Invoices.
• Ledgers.
• Returns.
• Tax payments.
• ITC calculations.
• Agreements.

Documents should be easily accessible whenever required.

2. Conduct Internal GST Reviews

Regular internal reviews can identify potential issues before they become investigation matters.

Businesses should review:

• Tax calculations.
• ITC eligibility.
• Supplier compliance.
• Turnover reporting.
• Stock reconciliation.

3. Train Employees Handling GST Records

Employees responsible for GST compliance should understand:

• Record maintenance.
• Invoice requirements.
• Tax procedures.
• Response handling.

Proper training reduces accidental compliance mistakes.

4. Maintain Digital Data Backup

Since GST records are often maintained digitally, businesses should keep secure backups of:

• Accounting software data.
• GST filings.
• Invoice records.
• Supporting documents.

GST Inspection, Search and Seizure Compliance Checklist

Frequently Asked Questions (FAQs)

1. What is Section 67 of GST Act?

Section 67 of the CGST Act provides powers to GST authorities for inspection, search, and seizure.

It allows authorised officers to inspect premises and search or seize goods, documents, books, or other relevant items when legal conditions are satisfied. 

2. When can GST officers conduct inspection?

GST officers can conduct inspection when a proper officer not below the rank of Joint Commissioner has reasons to believe that:

• Transactions are suppressed.
• Excess ITC has been claimed.
• Goods are kept in a manner indicating possible tax evasion.
• GST provisions are violated to evade tax. 

3. What is GST search and seizure?

GST search involves locating concealed goods, documents, or records relevant to GST proceedings.

GST seizure means taking possession or control of such goods, documents, or records according to legal provisions. 

4. What is GST INS-01?

GST INS-01 is the prescribed authorisation form used for inspection, search, or seizure proceedings under Section 67.

It provides written authority for conducting such proceedings. 

5. What is GST INS-02?

GST INS-02 is the seizure order issued when goods, documents, books, or other items are seized during GST proceedings. 

6. Can GST officers seize books and documents?

Yes.

GST officers may seize documents, books, or things that are considered relevant for GST proceedings.

However, such records can be retained only for the period necessary for examination, inquiry, or proceedings under GST law.

7. Can seized documents be returned?

Yes.

Documents, books, or things that are not relied upon for issuing proceedings are required to be returned within the prescribed period under GST law. 

8. Can GST officers search a warehouse or godown?

Yes.

Section 67 allows inspection of places including:

• Warehouses.
• Godowns.
• Transport-related premises.
• Other locations where goods or records may be kept. 

9. Is GST search the same as GST audit?

No.

GST audit under Section 65 is a compliance verification process.

GST search and seizure under Section 67 is generally an investigation action used when authorities suspect tax evasion or concealment.

10. Can businesses continue operations after GST seizure?

It depends on the nature of seizure and restrictions imposed.

Where goods are not physically seized but are restricted through an order, businesses cannot deal with such goods without permission from authorities.

Need Professional Support During GST Search, Inspection or Seizure Proceedings?

GST inspection, search, and seizure matters require careful handling because they involve detailed examination of business records, goods, and transactions.

A small documentation gap or incorrect explanation can create unnecessary compliance challenges.

At FilingSuvidha, our GST experts help businesses manage GST investigations, notices, compliance reviews, and documentation requirements.

Our GST support services include:

✔ GST Inspection Assistance
✔ GST Search and Seizure Guidance
✔ GST Notice Review
✔ GST Record Verification
✔ ITC Reconciliation Support
✔ GST Compliance Review
✔ GST Investigation Support
✔ Professional GST Advisory Services

Facing a GST inspection, search, or seizure issue? Get professional guidance before the matter becomes more complicated. Connect with FilingSuvidha experts today and protect your business compliance with the right approach.

Contact FilingSuvidha

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