GST probe wing asked not to call CEOs & CFOs, but to follow "bottom-up" approach

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GST Doctor on Fri Mar 15 2024



The Central Board of Indirect Tax and Customs (CBIC) has directed officials in Directorate General of Goods and Services Tax Intelligence (DGGI) to follow a "bottom-up" approach while investigating tax liability of MNCs. In recent advisory, indirect tax board instructed field officials to first question the "authorised person in MNC, responsible for tax calculations. GST officials should not directly summon company's CEOs or CFOs or directors at first instance. They should be called in case of discrepancies or revenue loss cases.

Reasons given by MNCs-

Several MNCs approached the finance ministry earlier , and mentioned the issues to the top management. As often during investigation, the Directors/ CEOs are asked to be available in person and these professionals are not able to respond because of their schedule. Even though, they are indulged in the business, still the are not aware of all tax conditioned questions. Hence, they usually hire expert of particular area to attend the tax investigation. The top management can be involved only in those rare cases wherever suitable explanations about business are not being furnished or tax department confronts the company to provide proof.

There are several cases of GST authorities, where GST has questioned top brass of the MNCs, and cited the recent case of secondment charges, which is subject to GST, if expatriate employee is being reimbursed by the Indian arm of foreign company for the services served to the subsidiary. This creates a flutter among MNC community. CBIC in December has directed GST authorities to follow more nuanced aprroach towards determining the tax liabilities of Indian subsidiaries of MNCs with regards to secondment charges.

The practice of DGGI officials questioning directly CEOs & CFOs has adverse affect on company operations, including work schedule interruption, causing legal burdens and affecting investor confidence, said Tanushree Roy, Director of Nangia Anderson India.

Previous Steps taken in this case-

Back in 2022, CBIC had asked field officials to avoid the process of issuing the summons to senior management unless it is clear that they are directly causing revenue loss. But this has not led to any significant change in the operational conduct of field officers.

Sandeep Sehgal, partner, AKM Global said, "New guidelines will reduce the time and efforts of the top management as the authorised personnel will be able to answer the queries of DGGI for tax scenarios." Another experts added that top officials of companies are often summoned by authorities on a short notice to the unit of DGGI which does not give close calculation and eventually creates additional issues for the top brass. Therefore, to give this a serious thought to conduct investigation proper approach should be followed.

"At a time when courts are encouraging hybrid work model, DGGI should consider recording statements through online mode. This will lead to ease of business." Sanjeev Sachdeva, partner, Luthra and Luthra said.


So, MNCs have approached to finance ministry to look into this matter and in response, tax boards asks GST probe wing to follow bottom-up approach and not summoning top management at first instance as it may cause several disturbance to the company. GST probe can directly issue summon only in case of serious "Tax theft" where there is clear indications are seen and leading to "revenue loss".

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