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Circumstances When Goods can be Detained Under GST

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can be detained under GST 2

Any transportation or movements of goods valuing more than Rupees 50,000 by a listed person must be convoyed by an e-way bill. The proper officer has the power sanctioned by the Centre Government or State Government to interrupt goods in transit.

The person in charge of a vehicle loading goods more than Rupees 50,000 is obligatory to carry the invoice and an e-way bill and other prescribed documents if required.

On seizure, the documents and goods can be examined by the appropriate officer appointed by the authority.       

Detention: Not permitting entree to the owner of the goods by a legal order or notice is named as detention. Nevertheless, the possession of goods still lies with the owner. It is issued when it is alleged that the goods are liable to confiscation. 

Seizure: Seizure is captivating over of actual custody of the goods by the division. Seizure can be made only after inquiry or investigation that the goods are liable to confiscation. 

Confiscation: Product confiscation is the ultimate act post complete evaluation. Confiscation of the goods is the final act after proper arbitration, the ownership as well as the possession goes out of the hands of the original owner and into the hands of the Government Authority once confiscation takes place 

Reason for Inspection

  • Non-disclosure of any operation involving the supply of goods or services or stock in hand.
  • Claimed input tax credit more than that should have been claimed.
  • Infringement of any provisions or rules of the Act to avoid tax.
  • Transport or storing of goods which bolted payment of tax or manipulating accounts or stocks which may cause avoidance of tax.

Penalty for seized goods
When any person transports any goods in infringement to the GST Act then the goods and related documents, and the vehicle carrying them shall be detained. The goods will be free only after the payment of tax and penalty. There can be two situations in this case- 

If the titleholder of the goods comes forward — in the given case, 100% penalty which is equal to the amount of tax will be charged

If the titleholder does not come forward — 50% of the value of goods before tax will be charged as penalty

For Exempted Goods least of the following –
2% of value of goods in case owner comes forward; or
5% of value of goods in case owner does not come forward;

OR

INR 25,000

We can take an example to understand better:

Value of goods GST @18% Penalty Total payment
When owner comes forward 50,000 9,000 9,000 18,000
When owner does not come forward 50,000 9,000 25,000 34,000

 We can take another example in case of exempted goods:

  Value of goods Rate Penalty Maximum Amount Penalty
When owner comes forward 10,00,000 2% 20,000

 

25,000

 

20,000
When owner does not come forward 10,00,000 5% 50,000 25,000 25,000

So, it outlooks that the penalty is very high if the owner of the goods does not come forward to collect the good.

The individual can also choose to provide a security covering the amount payable.   

Procedure for seizure of goods in transit
Goods and transportation will be detained or seized only with a prior order of detention to the person transporting the goods.

On detaining, the tax officer will pass a notice affirming the tax payable and pass an order for payment of tax along with penalty. A chance of being heard will be given before the seizure. On payment of the tax and penalty, all liabilities under custody will be cleared.

If the owner does not pay within 7 days the amount imposed thereon, then the goods will be confiscated.  The time of 7 days will be less in case of perishable or hazardous goods. 

Confiscation under GST
Both the goods and the transportation will be confiscated if any individual –

  • Supplies or receives both the goods in infringement of the provisions of GST to dodge tax
  • Cannot account for the incidence of seized goods
  • Supplies goods without registering even though he is falling under the liability to register
  • Interrupts rules to avoid tax
  • Uses any conveyance or vehicle to transport goods in breach to the GST provisions

The means of transportation may not be seized if the owner of the vehicle shall prove that it was used without his knowledge. Penalty will also be valid in each of the above mentioned cases.

Before confiscating the goods, the tax officer shall give an option of compensating a fine. 

Fine in lieu of confiscation
The least fine will be based on the following:

  • 100% tax amount if, the titleholder comes forward: and
  • 50% of the value of goods before tax, if the titleholder does not come forward

Extreme or maximum fine will be the market value of goods before tax.

  • For confiscation of vehicle, the possessor will be provided the option of compensating a fine equal to the tax payable on the goods.
  • Fine in lieu of confiscation does not release the other valid penalties. Other taxes, charges, penalties will still are payable afterward paying fine in lieu of confiscation.
  • Without a show cause notice goods will not be confiscated and also an opportunity of being heard will be provided.

If the goods confiscated once, it becomes the property of the appropriate government. Three months will be given for compensation of the confiscation fine after which the goods will be traded. Confiscation will not disturb other punishments under the provisions of GST. Hence, all penalties and prosecutions will still be valid.

At AJSH, we assist our clients in dealing with various GST matters (GST registration, filing of GST returns, claiming refund & GST Audits) by providing them adequate support and guidance from our end. If you have any questions or want to know more about circumstances when goods can be detained under GST, kindly contact us.

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