GST Evasion and The Role of DGGI

Frequently encountered in instances where the Directorate General of GST Intelligence (DGGI) issues notices alleging tax evasion, many may wonder about the organization's function and operations.

In this article, we've compiled a set of questions to shed light on the DGGI and its workings.

Directorate General of Central Excise Intelligence- The DGGI, formerly known as the Directorate General of Central Excise Intelligence (DGCEI) prior to the introduction of GST in 2017, primarily focuses on combating GST evasion. Functioning under the CBIC, it's entrusted with gathering intelligence related to GST evasion.

Role of the DGGI- The DGGI's charter emphasizes collecting, collating, and disseminating intelligence on GST, Central Excise (CE), and Service Tax (ST) evasion. It investigates offenses involving evasion of these taxes, alerts other law enforcement agencies about evasion trends, and suggests policy changes.

Scope of DGGI- Headquartered in New Delhi, the DGGI has four sub-national units and multiple zonal and regional units across India. Despite its relatively slim organizational size of about 1500 personnel, it has a nationwide presence.

DGGI Working Style- Operating involves a complex process of data analysis using advanced tools, monitoring revenue performance, and interacting closely with state GST enforcement wings. Additionally, it relies on information from various sources, including informers.

Informers of DGGI- Yes, DGGI has a reward scheme to incentivize informers, offering rewards of up to 20% of seized contraband goods' sale proceeds or the evaded tax amount. Similar rewards are available to officers involved in successful investigations.

DGGI ensurance the assessment of information- Collected intelligence is thoroughly examined for its accuracy and actionability. If found credible, investigations may commence through summons or inspections, adhering to the provisions of the GST law.

Powers & Functions of DGGI- DGGI is empowered to conduct inspections, searches, and seizures based on reasonable belief of tax evasion. However, such actions must adhere to legal procedures and be supported by concrete evidence.

Raid or 'Search Operation'- Following raids or obtaining documents, DGGI can summon individuals to explain issues. If evidence suggests offenses like tax evasion, individuals may be arrested, following due process under relevant laws.

Show Cause Notice- After collecting evidence, a Show Cause Notice (SCN) detailing alleged evasion is issued, providing an opportunity for the accused to respond and present their case during adjudication.

Why should taxpayers or companies beware of DGGI? Taxpayers and companies should realize that evasion attempts will likely be detected due to advanced analytics and data availability. Compliance with tax laws is essential to avoid severe consequences.

Recent Developments in DGGI's function- The issuance of a new Standard Operating Procedure (SOP) indicates a need for balanced enforcement actions, avoiding overzealousness and ensuring cases are based on solid evidence.

In a nut shell, DGGI plays a critical role in combating GST evasion in India through intelligence gathering, investigation, and enforcement actions, while also stressing compliance and engagement with taxpayers and industry stakeholders.