GST officers must provide written grounds of arrest under new guideline
New Delhi, Jan 17, 2025
The grounds of arrest must be explained to the arrested person and also furnished to him in writing as an Annexure to the Arrest Memo
GST officers are now required to provide a clear explanation of the “grounds of arrest” to a taxpayer, who is being placed under arrest for alleged tax evasion, fake invoices, fraudulent input tax credit etc of value exceeding Rs 5 crore.
The officer should also obtain written confirmation from the taxpayer acknowledging their understanding of these grounds, according to a set of new guidelines issued on January 13 by central board of indirect taxes and customs (CBIC).
The aim is to safeguard honest taxpayers from unwarranted harassment and foster greater trust in the tax administration.
The guidelines also prevent arbitrary arrests of GST registered persons by any officer and establishes a more transparent arrest procedure.
“The grounds of arrest must be explained to the arrested person and also furnished to him in writing as an Annexure to the Arrest Memo. Acknowledgement of the same should be taken from the arrested person at the time of service of the Arrest Memo,” CBIC said.
As per the earlier guideline issued in August 2022, GST officers were required to explain to the arrested person the grounds of arrest, and note the same in the arrest memo.
“The revised guidelines are poised to bring about a paradigm shift in the enforcement mechanism under the GST law by curbing arbitrary arrests and deterring coercive practices. Requiring officers to substantiate arrests with detailed reasoning ensures that enforcement actions are predicated on concrete evidence and not subjective discretion. This will safeguard honest taxpayers from unwarranted harassment and foster greater trust in the tax administration,” said Tushar Kumar, Adovcate, Supreme Court of India.
When can a GST registered person be arrested?
“GST authorities can arrest a person on the reasons to believe that he has committed offences such as tax evasion, fake invoices, fraudulent input tax credit etc. of value exceeding Rs 5 crores liable for imprisonment for a term up to 5 years,” said Kamal Aggarwal, Senior Partner, Singhania & Co.
Why did the GST department issue such an amendment in arrest guidelines?
As a brief background, as per the Instruction No. 02/2022-23 (GST-Investigation) dated 17 August, 2022, the person being arrested was required to be informed of grounds of arrest. The Delhi High Court in case of Kshitij Ghildiyal vs DGGI, Delhi [2024 (12) TMI 1001 – Delhi High Court] held that merely explaining the grounds of arrest to the accused is not sufficient and such grounds of arrest should be communicated to the accused in writing.
Harsh Shah, Partner at Economic Laws Practice explains how the new rule will have an impact?
At the time of arrest, the accused is typically not in the best frame of mind to be able to absorb the grounds of arrest being explained. In pursuant to this amendment, since the grounds need to be given in writing, it will allow the accused authorised representative to appropriately understand the background of the case and reasons for arrest and thereby being able to put forth the relevant arguments to defend the case.
[The Business Standard]
