This article has been written by Robin Dev pursuing a Diploma in Legal English Communication – oratory, writing, listening and accuracy course from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

The implementation of the Goods and Services Tax (“GST”) in India has brought about a substantial transformation of the country’s indirect tax regime. This tax reform marked a concerted effort to make the indirect tax system more efficient by streamlining the arrangement of taxes and boosting enforcement mechanisms to curb leakages and tax evasion. In this context, nations across various jurisdictions have progressively attributed critical importance to intelligence-based enforcement, rather than random search and seizure operations by tax authorities. One of the most consequential protagonists to have emerged from this milieu, therefore, has been the Directorate General of GST Intelligence (“DGGI”).

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For a law student exploring the intricacies of direct and indirect tax laws in India, it becomes imperative to understand the powers and functions accorded to the DGGI, to appreciate the agency’s seminal role in ensuring that an extremely diverse, multi-layered indirect tax system like the GST, functions smoothly and compliances are adhered to by all assessees. It is observed in law that in the realm of enforcement, effectiveness can only be obtained if such enforcement is driven by intelligence and information. This is because analysis of intelligence and information leads to the proper direction and area where effective enforcement action should be taken, thereby preserving the integrity of the tax system of any nation.

The present piece seeks to trace the genesis of the law that founded the DGGI, trace its developmental trajectory and comment upon the powers and functions that are essential to and vested in the DGGI. To keep the analysis crisp, the piece is divided into four sections and finally concluded.

Genesis of the Directorate General of GST Intelligence

The formation of the DGGI as a specialised unit under the CBIC umbrella was with the intention of tackling tax evasion and fraud in the GST regime. GST as a concept was first introduced in India on July 1, 2017, which replaced the complicated prevailing tax structure with a uniform tax system throughout the country. It has now also become apparent for the establishment of an intelligence agency to protect the revenue and make the GST mechanism proper and effective.

Governing authority and jurisdiction

The DGGI operates under CBIC administrative control, and it has zonal and regional units set up. The zonal units play a pivotal role in the coordination and supervision of the regional units under their jurisdiction. While this is the responsibility of the regional units, the goal is to have a more effective and localised approach to prevention and enforcement.

DGGI has countrywide jurisdiction and therefore spreads across the entire nation, giving it a pan-Indian presence. This wide jurisdiction is necessary to attack domestic and international tax evasion because the economic entities are spread in different countries and sectors.

The jurisdiction of DGGI is all over India and its omnipresence has been well depicted by its pan-India presence. This remarkable authority is needed to fight tax evasion, as economic activities cover-all elements of different activities.

Powers of DGGI under GST

Investigative powers

Summoning and examining persons: DGGI has the power to enquire and interrogate any person being scrutinised with respect to any inquiry undertaken by the Directorate General. These may be taxpayers, suppliers, passengers, or anyone else who has seen or listened to them.

Search and seizure: The DGGI can wield so many effective weapons, including, among others, the power to conduct searches and seizures. This power turns the control over documentary evidence acquisition for tax evasion and fraud cases. This is done through the conduct of punitive raids and the confiscation of relevant documents.

Arrest and detention: In cases of the most serious tax evasion, DGGI has the authority to arrest and detain the offenders. Nevertheless, the exercise of powers is done in a discretionary way and usually goes along with the fulfilment of certain strict requirements.

Surveillance and Intelligence

  • Data analysis: DGGI utilises advanced data analytics techniques to scrutinise bulky data generated from GST returns and other sources. This in turn allows the detection of differences and behaviours that are suggestive of tax evasion.
  • Risk profiling: Through risk profiling, the DGGI looks at the possibility of non-compliance by taxpayers. This prevention mindset helps the agency pinpoint the high-risk entities and sectors, hence strengthening the enforcement activities.

Functions of DGGI under GST

Anti-evasion activities

Identification of Evasion Schemes: The DGGI aims to thwart the use of many evading strategies likely to be utilised by taxpayers in an attempt to pay as little tax as possible. Among others that can be mentioned are schemes involving so-called “fake invoices,”  “input tax credit fraud,”  and other tricks that are used to present false information.

Coordinated Action with Other Agencies: Cooperation with other law agencies, for instance, the police and economic surveillance units, is a key factor in terminating the systems of undeclared taxpayers. DGGI interacts generally with these agencies to make sure, as far as possible, that a unitary approach is taken to tackle these issues.

Specialised training and capacity building

  • Training workshops: The DGGI organises training programmes for its employees, thus helping them improve their capabilities in the areas of intelligence data collection, analysis and investigation techniques. It is necessary that an individual do continuous learning to be on par with the changing and modern tactics of tax evasion.
  • Awareness programmes: The DGGI makes awareness granting to taxpayers on the consequences of tax evasion a significant part of its functions. The board of auditors runs an outreach programme to educate commercial and individual taxpayers on their duties within the framework of the GST regime.

Legal proceedings

  • Initiation of prosecutions: Whether there exists proof of wifful ignoring of taxation commitments, the DGGI commences prosecutions and legal proceedings against offenders. This is designed to be the avoidance of punishment and that is the deterrent to non-compliance.
  • Representation in courts: The DGGI formation or the government undertakes legal proceedings and represents the government in cases of tax evasion. This involves bringing forward the evidence, theoretically debating the legal options and seeing that the justice is fair.

Challenges and criticisms

While the DGGI, in row, makes sure of the credibility of the GST mechanism, it has not been spared problems, and it has been criticised.

  • Procedural concerns: The opponents of the provisions of the DGGI that give a lot of authority to the organ appeal to the discriminating priors of the process abuse. The agency must be committed to fair treatment in terms of obtaining information during investigations without trampling on the rights of the taxpayers, in addition to strict enforcement.
  • Need for transparency: The area of greater attention to the DGGI work involves the public demand for the heightened transparency of the DGGI functioning within the framework of the Economic Union. Designating relevant rules on investigational criteria, search warrant issuance, and arrest authorising can help bridge existing gaps of concern over arbitrary exercise of power.
  • Capacity constraints: DGGI confronts the issues of a limited resource base, considering both its staffing problem and its technological dictum. Proper investments in training and technology are a must in order to improve agency’s performance and cope with the dynamic and borderless realm of tax enforcement.

Conclusion

It is agued for the last time that the Directorate General of GST Intelligence has a great role in the implementation of India’s Goods and Services Tax (GST). In addition, it is a sizeable task for the functionaries of the DGGI—to secure revenue, bring irregular players to order and fight against those who transgress the law. An intensive understanding of the said powers and functions of DGGI for a law student definitely offers an excellent first step—a deep look into the intriguing field of the enforcement of the tax legal framework. When Brandeis J.’s words or the omnipresent government say, “government is the potent teacher…  For good or for ill, it teaches the whole people by its example, which is now greatly amplified, The role of the DGGI, the agency with such significant responsibility, also becomes greater at the same time. No doubt, the very systems that enable the administration of GST equally support national socio-economic growth by enhancing national development and revenues, yet the challenge of striking the right balance between enforcement and protection of taxpayer rights remains unresolved, and the integrity of the GST framework work is at the edge. Certain types of perception audits, close monitoring and evaluation of the actions of the DGGI, their roles and processes will be the main parts of the limiting mechanism to which the DGGI should be subjected; they will be the only way to clean up the present processes and procedures of the DGGI and to develop an effective, transparent and fair legal regulation governing Indian tax law.

References

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