Section 67(12) of the Tamil Nadu Goods and Services Tax Act, 2017 provides that the Commissioner or an officer authorized by him may cause purchase of any goods or services or both by any person authorized by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier.
The Tamil Nadu Government Commissioner authorized the Joint Commissioners (ST) vide Notification No.4, dated 12.07.2017 to carry out the provisions of Section 67(12) of the Act. Now the Joint Commissioners (Intelligence) are given such authority by the Tamil Nadu Government.
Purpose of test purchase
The following are the purposes for carrying out test purchases by the Authorized Authority-
- To ensure compliance in issuing tax invoice/bill of supply by the taxable person;
- To prevent composition taxable persons/unregistered persons from collecting tax from the customers;
- To prevent possible evasion of tax.
Procedure for test purchase
The Joint Commissioner (Intelligence) gives prior approval for conducting test purchases.
Basis for test purchase
- The Test purchase is based on evidence relating to non issuance of tax invoice/bill of supply by the taxable person.
- Test purchase should be done on rare occasions, where there is a strong proof of tax evasion.
Selection of case for test purchase
The selection of taxable person for test purchase include the following-
- Tax payers who are doing business in large volume but paying very meager amount of tax;
- Unregistered persons, whose turnover is suspected to be higher than the threshold meant for registration but not registered with the Department;
- Unregistered persons against whom complaints have been received along with valid supporting documentary evidences;
- Specific complaints received from public, if any;
- Evasion prone commodities and retail business, for which mostly estimation slips are issued like cement, tiles, granite, hardware, paints, electrical goods, electronic goods, iron and steel, FMCG, baker products, medical shops etc.;
- All services offered in hotels, restaurants, sweet stalls, educational institutions, amusement parks etc.;
- Personal grooming services, rental services etc.
In respect of complaints received against unregistered persons without valid documentary evidences test purchases shall be taken only after discreet enquiry.
- The Joint Commissioner may authorize a group of offices/officials for conducting test purchase at the business premises of any taxable person within their jurisdiction.
- If the test purchases are to be conducted at multiple places of business the manner of operation and time is to be followed uniformly at all such places of business so as to prevent leakage of information regarding the test purchase operations.
- The test purchase shall be conducted for a value more than Rs.200/-.
- The group of officers conducting the test purchase shall not give any disturbance to the business activity and shall behave like ordinary customers.
- If proper invoice/bill of supply is issued by the taxable person, during the test purchase, then the amount spent by the officer on test purchase, shall be refunded by the taxable person.
- The officer shall obtain the copy of the original invoice, cancelled invoice, a statement of witness, if any, available during the course of test purchase.
- If proper tax invoice/bill of supply is not issued by the registered person during test purchase then the Group Head shall take the statement, after disclosing the identity of the inspecting group and shall initiate penal action under section 112(1)(i) of the TNGST Act, 2017.
- The proceedings of the test purchase should be recorded in writing by the proper officer concerned for appropriate follow up action.
- The inspection team should take note of the volume of the business, goods stored available at the place of business etc., in order to decide to take further course of action like registration, inspection etc.
- If it is found that the turnover limit of the registered person exceeds Rs.40 lakhs then action shall be initiated suo motu registration. A report shall be forwarded to the concerned jurisdictional officer through the Joint Commissioner (ST) for follow up on registration, adjudication for the period till registration.
- If the composition taxable person is found collecting tax and contravening the provisions of the Act then action shall be initiated to recover the entire tax that has been collected by him, by way of adjudication.
- If the taxable person has not issued tax invoice/bill of supply, the Joint Commissioner (Intelligence) shall proceed action immediately under Section 67 of the Act with an intimation to Commissioner of Commercial Taxes.
- The Group Head shall submit the report on test purchases to Joint Commissioner (Intelligence) through proper channel, on conclusion of test purchase operation.
- The Joint Commissioner (Intelligence) shall submit a report to the Commissioner about the test purchase operation within 7 days of the conduct of the test purchase operation.
- A periodical report shall be submitted to the Commissioner on or before 10th of every month in order to monitor the outcome of the test purchase.
- The denomination of the cash issued for test operations along with the serial numbers of the currency shall be noted in the authorization form and the same shall be recorded in the Statement as well as in the test purchase report submitted to the Commissioner.
Generation of DRC-07 has to be enabled in the back office portal, for the authorized officer conducting test purchase, in order to raise a demand in the case of imposition of penalty. The details of the offences booked and the amount collected as penalty for test purchase should be linked to the tax payer’s profile and are made available under a separate head ‘Test Purchase’.
The Test purchase group conducted test purchases in Trichy District at about 165 outlets over a period of three weeks. It was alleged by the Association of Traders that the test purchase has been conducted by the officials even on those traders who are not coming under the ambit of GST Act. Further a penalty of Rs.20,000/- was imposed which was unjustified one as they are paying the GST regularly. A Statewise protest was made during the last week of November 2022. The Commercial Tax Ministry of the State interfered and assured that such operations will be deferred. The traders are in the belief that the Department will not start test purchases in the State in the future on the ground that such practice is not prevalent in other States.
By: Mr. M. GOVINDARAJAN -
January 25, 2023