GST evasion: CBIC asks field offices to exercise max caution, prudence in property attachment

The Central Board of Indirect Taxes and Customs (CBIC) has come out with guidelines for provisional attachment of property under GST Act which tasks the Commissioner to exercise due diligence and carefully examine all the facts of the case, including the nature of offence and amount of revenue involved, and also record on file the basis on which he/she has formed such an opinion to attach property of the taxpayer.

"It is reiterated that the power of provisional attachment must not be exercised in a routine/mechanical manner ... The remedy of attachment being, by its very nature, extraordinary, has to be resorted to with utmost circumspection and with maximum care and caution," the CBIC said.

In the guidelines the CBIC listed out types of cases where provisional attachment can be considered to be resorted to subject to specific facts of the case.

These include where a taxable person has supplied any goods or services or both without issue of any invoice with an intention to evade tax; or issued invoice or bill without supply of goods or services or both; or fraudulently availed input tax credit.

Also cases where a taxpayer has collected any amount as tax but has failed to pay the same to the government beyond a period of three months from the date on which such payment becomes due; or fraudulently obtained refund; or passed on input tax credit fraudulently to the recipients but has not paid the commensurate tax would qualify for provisional attachment of property.

The provisional attachment of property would be valid for a period of one year.

"It should be ensured that the value of property attached provisionally is not excessive. The provisional attachment of property shall be to the extent it is required to protect the interest of revenue, that is to say, the value of attached property should be as near as possible to the estimated amount of pending revenue against such person," the CBIC said.

It said tax officer should normally attach movable property of a taxpayer only if the immovable property, available for attachment, is not sufficient to protect the interests of revenue.

"In cases where the movable property, including bank account, belonging to taxable person has been attached, such movable property may be released if taxable person offers, in lieu of movable property, any other immovable property which is sufficient to protect the interest of revenue. Such immovable property should be of value not less than the tax amount in dispute," it added.

Deloitte India Partner M S Mani said the guidelines formulated in connection with provisional attachment of property would ensure that the provisions of Section 83 of GST Act are used only in cases where there is no other recourse available to the tax authority and major infractions have been committed. Secton 83 deals with provisional attachment of property to protect interest of revenue.

"However the fact that it can be invoked even in cases of delay in payment of GST beyond 3 months after collection, would be a matter of concern for many businesses who are in revival mode with limited working capital," Mani added.

AMRG & Associates Senior Partner Rajat Mohan said "CBIC''s guidelines on the provisional attachment of property are fair for taxpayer, will protect the interests of revenue and would also withstand judicial scrutiny at higher forums".

EY Tax Partner Abhishek Jain said the intention behind the guidelines is to prevent revenue leakage and also making sure that genuine tax payers are not unnecessarily harassed.

"These guidelines are in tune with judgements pronounced by jurisdictional courts on the said matter," Jain added.