CBIC Issues Instruction Regarding Tax Payment During Search, Inspection Or Investigation: EY Analysis

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EY Update

This tax alert summarises a recent Instruction issued by Central Board of Indirect Taxes and Customs pertaining to deposit of tax during search, inspection or investigation.

CBIC noticed instances where some of the taxpayers have alleged use of force and coercion by the tax officers for depositing Goods and Services Tax liability during search, inspection or investigation.

As per Section 73(5) and 74(5) of the Central Goods and Services Tax Act, 2017 a taxpayer has an option to voluntarily deposit tax through DRC-03 before issuance of show cause notice in order to avoid penal implications.

Recovery of taxes not paid or short paid can be made by the Revenue under Section 79 of CGST Act only after following due legal process of issuance of SCN and subsequent confirmation of demand by adjudication order.

Therefore, it is clarified that situation may not arise where recovery of tax dues on account of any issue detected during the proceedings, has to be made by the tax officer during the course of search, inspection or investigation. However, there is no bar on the taxpayer for voluntary payment of any tax liability, ascertained by him or the tax officer, before or at any stage of the proceedings.

In case any complaint is received from a taxpayer regarding use of force or coercion by any of the officers for getting the amount deposited during search, inspection or investigation, the same may be enquired. In case of any wrongdoing on the part of any tax officer, strict disciplinary action as per law may be taken against the said officer.

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