Parallel Investigation and Assessment by Central and State authorities

Under the GST regime, both Central GST (CGST) and State GST (SGST) authorities are empowered to initiate investigations and assessments. However, when both authorities initiate action simultaneously (or on the same issue), it leads to the problem of parallel investigation and assessment — which can cause duplication, harassment, and legal complications.

Relevant provision—Section 6 of CGST Act

GST is levied concurrently by the Centre and States on the same transaction. Thus, a supply may attract CGST + SGST (intra-state) or IGST (inter-state).

Section 6 of the CGST Act, 2017 provides for cross-empowerment of officers of CGST and SGST.

Clause (b) of sub-section (2) of section 6 is reproduced below for your reference-

“(2) Subject to the conditions specified in the notification issued under sub-section (1),––

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(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”

Interpretation: Once either the CGST or SGST authority initiates proceedings (investigation, inspection, audit, assessment), the other authority is barred from initiating fresh proceedings on the same subject matter.

• The object of Section 6(2)(b) of the Act is to ensure that cross empowerment of officers of Central Tax and State Tax do not result in the taxpayers being subjected to parallel proceedings.

• This clause prohibits separate initiation of proceedings on the same subject-matter by the proper officer under the CGST Act when proceeding on the same subject-matter by the proper officer under the State Act has been initiated.

• Section 6 of the CGST Act and the identical pari-materia provision in the respective State and Union Territories statutes, is a nuanced provision that enshrines both the concept as-well as the contours of “single interface” system and “cross-empowerment”.

• It delineates when and how the various officers appointed under different corresponding legislations shall act as “proper officer” for the purposes of the said legislation.

• In other words, under Section 6(2)(b), the “subject matter” is intrinsically tied to the determination of the specific violation under scrutiny or the liability alleged to be unpaid. The statutory bar is triggered only when the two proceedings against the same taxpayer are, in substance, directed towards the very same or overlapping deficiency in tax discharge or the identical contravention alleged.

• Where the proceedings concern distinct infractions, each Department is entitled to proceed within its respective statutory remit without infringing the prohibition.

• Where the proceedings concern distinct infractions, each Department is entitled to proceed within its respective statutory remit without infringing the prohibition.

Recently, SUPREME COURT OF INDIA in case of Armour Security (India) Ltd. v/s Commissioner, CGST, Delhi [2025] 87 TAXLOK.COM 033 (SC), examined whether issuance of summons under Section 70 of the CGST Act amounts to “initiation of proceedings” barred under Section 6(2)(b) where State GST authorities had already acted on the same subject matter.

The petitioner, a company providing security services, challenged summons issued after a search, claiming lack of jurisdiction. The Court held that summons/inquiry differ from “proceedings” like assessment or demand and hence do not attract the statutory bar, thereby upholding the validity of summons.

Cross-empowerment amongst officers summarized as follows

1. Clause (b) of sub-section (2) of Section 6 of the CGST Act and the equivalent State enactments bars the “initiation of any proceedings” on the “same subject matter”.

2. Any action arising from the audit of accounts or detailed scrutiny of returns must be initiated by the tax administration to which the taxpayer is assigned.

3. Intelligence based enforcement action can be initiated by any one of the Central or the State tax administrations despite the taxpayer having been assigned to the other administration.

4. Parallel proceedings should not be initiated by other tax administration when one of the tax administrations has already initiated intelligence-based enforcement action.

5. All actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute “proceedings” within the meaning of Section 6(2)(b) of the CGST Act.

6. The expression “initiation of any proceedings” occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc.

7. The expression “subject matter” refers to any tax liability, deficiency, or obligation arising from any particular contravention which the Department seeks to assess or recover.

8. Where any two proceedings initiated by the Department seek to assess or recover an identical or a partial overlap in the tax liability, deficiency or obligation arising from any particular contravention, the bar of Section 6(2)(b) would be immediately attracted.

9. Where the proceedings concern distinct infractions, the same would not constitute a “same subject matter” even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted.

10. The twofold test for determining whether a subject matter is “same” entails, first, determining if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts, and secondly, if the demand or relief sought is identical.

SC has also issued following guidelines to be followed in cases where, after the commencement of an inquiry or investigation by one authority, another inquiry or investigation on the same subject matter is initiated by a different authority.

1. Where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response, as the case may be. We say, so because, mere issuance of a summons does not enable either the issuing authority or the recipient to ascertain that proceedings have been initiated.

2. Where an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation.

3. Upon receipt of such intimation from the assessee, the respective tax authorities shall communicate with each other to verify the veracity of the assessee’s claim. We say, so as this course of action would obviate needless duplication of proceedings and ensure optimal utilization of the Department’s time, effort, and resources, bearing in mind that action initiated by one authority enures to benefit of all.

4. If the claim of the taxable person regarding the overlap of inquiries is found untenable, and the investigations of the two authorities pertain to different “subject matters”, an intimation to this effect, along with the reasons and a specification of the distinct subject matters, shall be immediately conveyed in writing to the taxable person.

5. The taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice. Any show cause notice issued in respect of a liability already covered by an existing show cause notice shall be quashed.

6. However, if the Central or the State tax authority, as the case may be finds that the matter being inquired into or investigated by it is already the subject of inquiry or investigation by another authority, both authorities shall decide inter-se which of them shall continue with the inquiry or investigation. In such a scenario the other authority shall duly forward all material and information relating to its inquiry or investigation into the matter to the authority designated to carry the inquiry or investigation to its logical conclusion. We say, so because, the taxable person except for being afforded the statutory protection from duplication of proceedings, otherwise has no locus to claim which authority should proceed with the inquiry or investigation in a particular matter.

7. However, where the authorities are unable to reach a decision as to which of them shall continue with the inquiry or investigation, then in such circumstances, the authority that first initiated the inquiry or investigation shall be empowered to carry it to its logical conclusion, and the courts in such a case would be competent to pass an order for transferring the inquiry or investigation to that authority.

8. If it is found that the authorities are not complying with these aforementioned guidelines, it shall be open to the taxable person to file a writ petition before the concerned High Court under Article 226 of the Constitution of India.

9. At the same time, taxable persons shall ensure complete cooperation with the authorities. It is incumbent upon them to appear in response to a summons and/or reply to a notice.

Also refer below case laws—

• "Inquiry" u/s 70 has not been prohibited under Section 6(2)(b) of the CGST Act — G.K. Trading Versus Union of India & Ors. — [2020] 31 TAXLOK.COM 123 (Allahabad)

• Issuance of summons under Section 70 of the CGST Act for conducting an inquiry and to obtain a statement from the appellant cannot be construed to be bar under Section 6(2)(b) of the CGST Act. — Kuppan Gounder P.G. Natarajan Versus Directorate General of GST Intelligence — [2021] 40 TAXLOK.COM 025 (Madras)

• The Court quashes the show cause notice passed by state GST authority and directs that till the conclusion of the proceeding initiated against the Petitioner by the DGGSTI, no coercive action be taken against the Petitioner by state GST authority —Anurag Suri Versus Director General of Goods and Services Tax Intelligence & Ors. — [2021] 34 TAXLOK.COM 090 (Orissa)

• The Court ruled that an inquiry initiated by one authority under Section 70 does not amount to the commencement of proceedings under Section 6(2) of the CGST/SGST Acts. K.T. Saidalavi Versus State Tax Officer — [2024] 76 TAXLOK.COM 232 (Kerala)

• Issuance of summons for conducting an inquiry and to obtain a statement from the appellant cannot be construed to be bar under Section 6(2)(b) of the CGST Act. Rais Khan Versus Add. Commissioner, Enforcement Wing-II — [2024] 70 TAXLOK.COM 092 (Rajasthan)

• The court held that the DGGI cannot initiate proceedings already started by the State authorities. Stalwart Alloys India Pvt. Ltd. Versus Union of India & Ors. — [2024] 75 TAXLOK.COM 138 (P&H)

• The court hold that once State authorities have initiated proceedings, Central authorities cannot act on the same subject matter under Section 6(2)(b) of the CGST Act, 2017. Kundlas Loh Udyog Versus State of H.P. — [2024] 76 TAXLOK.COM 058 (HP)

• Parallel proceedings cannot be conducted by three wings of the same department for the very same period. - R.P. Buildcon Pvt. Ltd. [2022] 52 TAXLOK.COM 104 (Calcutta)

Conclusion— Parallel investigations and assessments by Central and State authorities are an inevitable aspect of India’s federal structure. While legally permissible and often necessary, uncoordinated or excessive parallelism can result in inefficiencies, constitutional challenges, and public grievance. The need of the hour is a robust legal and administrative framework that respects the federal spirit while ensuring coordination, efficiency, and fairness in investigative and assessment processes.