Section 67(1): Inspection and the Reasons-to-Believe Test

Section 67 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

GST is a self-assessment regime. Section 59 appoints the registered person as the only person who assesses. Every power that lets the department into that space is an exception, and an exception has to satisfy its own conditions before it can be used.

Section 67(1): where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that (a) a taxable person has suppressed any transaction relating to supply of goods or services or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement, or has indulged in contravention of any provision of the Act or rules to evade tax; or (b) any person engaged in the business of transporting goods, or an owner or operator of a warehouse or godown or any other place, is keeping goods which have escaped payment of tax, or has kept his accounts or goods in a manner likely to cause evasion of tax — he may authorise in writing any other officer of central tax to inspect any places of business of those persons. Rule 139(1): the authorisation is in FORM GST INS-01.

The three preconditions

Every one of these must be satisfied. Together they are what the ICAI handbook calls the pre-conditions to any intrusive action.

1. Rank. The officer forming the belief must be not below the rank of Joint Commissioner. An authorisation issued by a Deputy or Assistant Commissioner is without jurisdiction, and no subsequent approval cures it.

2. Reasons to believe. Not suspicion, not a hunch, not a desire to verify. Reasons — material — producing a belief. And the belief must exist before the authorisation, not be constructed from what the inspection later found.

3. Authorisation in writing. The Joint Commissioner does not inspect; he authorises in writing another officer. Rule 139(1) prescribes FORM GST INS-01, naming the officer authorised and the place to be visited.

The visiting officer therefore carries someone else's authority, confined to what the INS-01 says. Rule 139 and the INS forms →

The grounds in clause (a): a taxable person

Three, and each is narrower than it first reads.

Suppressed any transaction relating to supply, or the stock of goods in hand. Suppression means concealment of something that ought to have been disclosed. A transaction reported in GSTR-1, disclosed in the annual return, or recorded in the audited accounts has not been suppressed, whatever view is taken of its taxability.

Claimed input tax credit in excess of his entitlement. A quantitative excess over entitlement — not a difference of view about eligibility, and not a GSTR-2B mismatch by itself.

Indulged in contravention of any provision... to evade tax. Note the tail. It is not any contravention; it is contravention to evade tax. A procedural lapse without an evasion purpose does not fit.

The ICAI handbook makes the point sharply: these are anti-evasion powers, and routine verification matters are not their occasion. Where a discrepancy can be examined under s.61 scrutiny or s.65 audit, invoking s.67 to do the same work is a misapplication of the provision. Scrutiny, audit or investigation →

The grounds in clause (b): third parties

Clause (b) reaches persons who are not the taxable person:

• a person engaged in the business of transporting goods;
• an owner or operator of a warehouse or a godown or any other place.

The ground is that such a person is keeping goods which have escaped payment of tax, or has kept accounts or goods in such a manner as is likely to cause evasion.

This is how a transporter's godown, a third-party warehouse or a C&F agent's premises come to be inspected. The person inspected need not be registered, and need not be the person suspected of evasion.

What "inspect" permits, and what it does not

Inspection is examination. The authorised officer may enter and inspect the places of business.

Inspection is not search. Search — looking for things secreted — requires s.67(2), and a separate satisfaction. The ICAI handbook devotes a full section to the distinction, because an INS-01 issued for inspection does not authorise a search, and material gathered by searching under an inspection authorisation is open to challenge. Inspection versus search →

Inspection is not seizure. Seizure requires the further conditions of s.67(2) and an order in FORM GST INS-02.

Inspection is not a power to interrogate. Section 67 confers no power to record statements. A statement is recorded under s.70 summons, which is a different power with different consequences — including that the inquiry is a judicial proceeding under s.193 and s.228 of the Indian Penal Code. Section 70 summons →

Inspection is confined to places of business. Clause (a) says "any places of business of the taxable person"; clause (b) names the transporter's or warehouse keeper's places. A residence that is not a declared or actual place of business is outside the sub-section.

What to do when an INS-01 is presented

1. Read the INS-01. Whose signature, what rank, which premises, which person, what date.
2. Verify the rank — Joint Commissioner or above. Record the name and designation.
3. Note whether it authorises inspection, search or seizure. The form says so. What follows must stay within it.
4. Take a copy, or photograph it, and note the time of entry.
5. Cooperate on access. Obstruction has its own consequences, and the validity of the proceeding is challenged afterwards, not by resisting at the door.
6. Record what happens — who entered, what was examined, what was taken, what was asked, and at what time. Ask for the panchnama and read it before anyone signs.
7. Do not agree to a payment on the spot. A "voluntary" DRC-03 made during an inspection is neither voluntary nor final. Spot recovery →

Key takeaways

• Section 67(1) requires rank (Joint Commissioner), reasons to believe, and a written INS-01 authorisation.
• The reasons must exist before the authorisation, and must be anti-evasion grounds.
• Clause (a) covers a taxable person; clause (b) covers transporters, warehouse and godown keepers.
• Something disclosed in a return or the accounts is not suppressed.
• Inspection does not carry a power to search, seize, or record statements.
• Cooperate on access, record everything, and challenge validity afterwards.

Read next

• Inspection Versus Search Under GST
• Rule 139 and the INS Forms: The Search and Seizure Procedure
• Challenging "Reasons to Believe" in a GST Search
• Sections 67-72 CGST — Inspection, Search, Seizure and Detention

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Inspection, Search, Seizure and Arrest under GST (July 2025).