Section 67 CGST Act — GST Inspection, Search & Seizure

1. Why Section 67 matters

Searches such as “Section 67 CGST Act”, “GST inspection”, “GST search and seizure”, “GST raid”, “GST search warrant”, “INS-01”, “INS-02”, “INS-03”, “INS-04”, “INS-05”, “GST officer search powers” and “GST seizure of goods” relate directly to this provision.

Section 67 is one of the most important enforcement provisions in the CGST Act. It allows the department to inspect places and, in specified circumstances, search and seize goods, documents, books or things relevant to GST proceedings.

2. Section 67 in very simple language

Suppose GST officers receive reliable information that a business is hiding sales, maintaining undeclared stock or using false records to evade GST.

In an appropriate case, the law allows authorised officers to inspect the premises. If there is further reason to believe that taxable goods, books, documents or other relevant things are hidden at a place, the law allows search and seizure in accordance with Section 67.

The power is substantial, but it is not unlimited. The action must remain within the authority and statutory conditions of the CGST Act and Rules.

3. Inspection vs search vs seizure

CBIC's GST FAQ describes inspection as a comparatively softer power than search, while Section 67 and Rule 139 provide the statutory framework for inspection, search and seizure. citeturn0search17turn0search15

4. When can inspection be authorised?

Under Section 67(1), a proper officer not below the rank of Joint Commissioner must have reasons to believe that specified circumstances exist.

Inspection may be authorised where:

• a taxable person has suppressed a transaction relating to supply;
• stock of goods in hand has been suppressed;
• ITC has been claimed in excess of entitlement;
• the person has contravened GST law/rules to evade tax; or
• a transporter, warehouse/godown owner or operator or another place-holder is keeping goods on which tax has escaped payment or maintaining accounts/goods in a manner likely to cause tax evasion.

The statutory language is important: the officer must have reasons to believe; a routine desire to inspect every business is not the Section 67(1) test. citeturn0search14

5. When can search and seizure be authorised?

Section 67(2) applies where the proper officer not below Joint Commissioner, following an inspection or otherwise, has reasons to believe that:

• goods liable to confiscation; or
• documents, books or things useful or relevant to proceedings under the Act

are secreted in any place.

The proper officer may then authorise another central-tax officer in writing to search and seize, or may himself conduct the search and seizure.

6. Meaning of “reasons to believe”

“Reasons to believe” is an important legal safeguard. It means the officer's belief must be based on relevant material or information and must satisfy the statutory threshold; it is not merely a personal suspicion without supporting basis.

The exact adequacy of reasons depends on the facts of each case and can become an important issue in judicial review.

7. Who can authorise action?

The proper officer who is not below the rank of Joint Commissioner exercises the statutory authorisation power under Section 67.

Rule 139 provides for FORM GST INS-01, by which the proper officer authorises a subordinate central-tax officer to conduct inspection, search or seizure in accordance with Section 67.

Therefore, a business should carefully preserve the authorisation and record the officers who actually conduct the action.

8. Places that can be inspected/searched

Section 67 is not limited to the registered principal place of business.

Depending on the statutory circumstances, the provision covers:

• places of business of a taxable person;
• places connected with persons engaged in transporting goods;
• warehouses and godowns;
• other places where relevant goods, books, documents or things are believed to be located.

The exact scope of the authorised action should always be read with the written authorisation.

9. Goods, books, documents and things

Section 67 can concern more than physical goods.

10. When physical seizure is not practicable

The first proviso to Section 67(2) deals with situations where physical seizure of goods is not practicable.

In such a case, the proper officer or authorised officer may serve an order on the owner/custodian directing that the goods must not be removed, transferred, disposed of or otherwise dealt with without prior permission.

Rule 139 prescribes FORM GST INS-03 for this prohibition order.

11. Electronic records and devices

Modern businesses keep substantial accounting information electronically. During a search, the practical challenge is often not only physical books but also digital records.

Businesses should therefore maintain:

• accounting-system backups;
• ERP audit trails;
• invoice databases;
• e-invoice records;
• e-way bill records;
• GST return workings;
• ITC reconciliation files;
• contract databases; and
• appropriate access and backup documentation.

Electronic information requested or taken during proceedings should be handled according to the applicable authorisation and statutory procedure.

12. How long can seized records be retained?

Section 67(2) states that seized documents, books or things should be retained only for as long as necessary for their examination and for inquiry or proceedings under the Act.

The law therefore does not treat seizure as an unrestricted permanent taking of records.

Businesses should obtain and preserve a proper inventory of what was taken and maintain copies or data extracts necessary for continuity of accounting and legal compliance, subject to the officer's lawful requirements.

13. Two-year return rule

Section 67(7) contains an important rule concerning seized documents/books/things.

Where such records are not relied upon for the issuance of a notice under the Act, they are to be returned to the person from whose custody they were seized within the prescribed statutory period.

The provision sets a two-year period from the date of seizure, unless the reasons for non-return are recorded in writing and the period is extended.

14. Magistrate/court interaction

Section 67 also contains provisions concerning documents/books/things seized during search and their production before the Magistrate in appropriate circumstances.

Because search and seizure proceedings can interact with criminal/evidentiary proceedings, businesses should treat any court-directed or legally required production separately from the ordinary tax-administration process.

15. Perishable or hazardous goods

Perishable or hazardous goods require special handling because simply storing them for a prolonged period may cause deterioration or create safety issues.

Rule 141 provides a mechanism for release/disposal of such goods. Where the taxable person pays the specified amount, the goods may be released through FORM GST INS-05 subject to the rule.

If the required amount is not paid, the proper officer may dispose of the goods and adjust the amount realised against applicable liabilities.

16. Provisional release of seized goods

Seized goods can, in the circumstances prescribed by the Rules, be released provisionally.

Rule 140 provides for:

• FORM GST INS-04 bond for the value of the goods; and
• security in the form of a bank guarantee equivalent to the applicable tax, interest and penalty.

If the person fails to produce the goods when required, the security may be dealt with according to the Rule.

This is particularly important for businesses whose operations would be severely disrupted if essential inventory or machinery-related goods remain under seizure.

17. INS forms under the Rules

Rule 139 also requires an inventory of seized goods/documents/books/things, including relevant description, quantity/unit and identification details, signed by the person from whom the items are seized. citeturn0search15turn0search16

18. Seized goods vs confiscation

Seizure and confiscation are not the same thing.

19. Section 74A and demand proceedings

Inspection/search can generate evidence that later supports tax determination proceedings. The search itself is not the same thing as the final tax assessment.

Depending on the relevant period and facts, the department may proceed under the applicable tax-determination provisions, including Section 73, Section 74 or Section 74A.

Therefore, a taxpayer should separately analyse:

• validity and scope of the inspection/search;
• what was actually seized;
• what evidence the department obtained;
• how that evidence is proposed to be used; and
• the subsequent tax-determination proceedings.

20. Section 67 vs arrest under Section 69

Search/seizure and arrest are separate statutory powers.

A search does not automatically mean that every person present is liable to arrest.

21. Section 67 vs GST audit under Section 65

22. Section 67 vs special audit under Section 66

23. Practical rights and responsibilities

24. Detailed practical examples

Example 1 — Suppressed sales

Information indicates that a taxable person has suppressed transactions. If the Joint Commissioner has the required reasons to believe, inspection can be authorised under Section 67(1).

Example 2 — Unaccounted stock

Physical stock substantially exceeds recorded stock. The department may investigate the source, ownership and GST treatment of the goods.

Example 3 — Excess ITC

ITC appears substantially beyond entitlement. The department may examine invoices, suppliers, receipt of goods/services and reversals.

Example 4 — Warehouse

Goods are stored in a warehouse with records indicating possible tax evasion. Section 67 specifically covers warehouse/godown situations.

Example 5 — Search after inspection

An inspection produces information suggesting that relevant documents are concealed elsewhere. Section 67(2) can become relevant subject to the statutory reasons-to-believe threshold.

Example 6 — Goods cannot be physically seized

Large machinery or other goods cannot practically be removed. A prohibition order under INS-03 may be used where the statutory conditions are satisfied.

Example 7 — Perishable goods

Seized perishable goods cannot safely remain in storage for a prolonged period. Rule 141 provides a special release/disposal mechanism.

Example 8 — Provisional release

A business requires seized goods for operations. Subject to the Rules, provisional release can be sought using the prescribed bond and security mechanism.

Example 9 — Electronic records

A business maintains its books entirely in ERP systems. Search proceedings may involve relevant electronic information; the business should preserve backups and document what data was provided/taken.

Example 10 — Construction site

Large quantities of steel and cement are found at a project site without proper documentation. The company should produce purchase invoices, GRNs, e-way bills, stock records and project ownership evidence.

25. Construction and infrastructure examples

Material at site

Maintain site-wise stock registers, GRNs, delivery challans, e-way bills and supplier invoices so that physical stock can be reconciled with books.

Project warehouses

If materials are stored at multiple project warehouses, ownership and movement records should clearly identify the principal contractor, subcontractor and project.

Machinery

Maintain asset registers and ownership documents for large machinery so that a physical inspection does not create avoidable disputes.

Subcontractor custody

Where goods belonging to the principal contractor are held by a subcontractor, maintain challans and written custody arrangements.

Multiple GSTINs

Separate State-wise GST records help establish which registered person owns or controls goods at a particular location.

26. Documents to keep ready

• GST registration certificate;
• authorisation/inspection records;
• sales and purchase registers;
• stock registers;
• tax invoices and credit/debit notes;
• e-invoices;
• e-way bills;
• delivery challans;
• contracts and work orders;
• bank records;
• ITC reconciliation;
• GSTR-1 and GSTR-3B;
• electronic accounting backups;
• fixed asset registers;
• project/site records;
• prior audit reports; and
• inventory/seizure documents received during proceedings.

27. Internal controls

28. Legislative development

29. Common mistakes

• Calling every GST audit a “raid”.
• Assuming inspection, search and seizure are legally identical.
• Failing to preserve the written authorisation and inventory.
• Obstructing a lawful search.
• Deleting or modifying electronic records after proceedings begin.
• Not maintaining site-wise stock records.
• Not reconciling e-way bills with physical stock.
• Failing to record which original documents were taken.
• Confusing seizure with confiscation.
• Assuming seizure itself is the final tax demand.

30. Professional response workflow

31. Section 67 GST FAQs

What is Section 67 of the CGST Act?

Section 67 gives GST authorities statutory powers of inspection, search and seizure in specified circumstances where the required reasons to believe exist.

Who can authorise GST inspection/search?

A proper officer not below the rank of Joint Commissioner has the statutory authorisation power under Section 67, subject to the applicable conditions.

What is INS-01?

INS-01 is the authorisation under Rule 139 for inspection, search or seizure.

What is INS-02?

INS-02 is the seizure order.

What is INS-03?

INS-03 is the prohibition order used where physical seizure is not practicable.

What is INS-04?

INS-04 is the bond used for provisional release of seized goods under Rule 140.

What is INS-05?

INS-05 is used for release/disposal of perishable or hazardous goods under Rule 141.

What does “reasons to believe” mean?

It means the authorised officer must have a legally relevant basis for the belief that the circumstances specified in Section 67 exist. It is more than an unsupported suspicion.

Can GST officers search a warehouse?

Yes, Section 67 expressly covers warehouse/godown situations where the statutory conditions are satisfied.

Can GST officers seize books and documents?

Yes, where Section 67(2) conditions are satisfied and the books/documents/things are useful or relevant to proceedings.

Can GST officers seize electronic records?

Relevant electronic records may be examined or taken in accordance with the applicable statutory authorisation and procedure.

How long can seized documents be kept?

They should be retained only as long as necessary for examination and inquiry/proceedings. Section 67 also contains a two-year return framework for records not relied upon for issuance of a notice, subject to the statutory extension mechanism.

Can seized goods be released?

Yes. Rule 140 provides a provisional-release mechanism subject to bond and security. Special rules apply to perishable or hazardous goods.

Is seizure the same as confiscation?

No. Seizure is a custody/control measure during proceedings. Confiscation is a separate legal consequence governed by the applicable provisions.

Is a GST search the same as a GST audit?

No. Section 65 provides for departmental audit; Section 67 provides inspection, search and seizure powers.

Does a Section 67 search automatically create a tax demand?

No. Evidence obtained during search may support subsequent tax-determination or other proceedings, but the search itself is not the final tax assessment.

32. Related provisions