New Delhi: In a major decision to weed out fake GST dealers and unreliable operators from the goods and services tax system, the Government has made it mandatory to appear-in-person to obtain a GST number. The new rule, which was recommended by the law committee of the GST Council, has been notified on Tuesday.
The stringent measures notified on Tuesday include four pillars, strict verification for new GST registration; swift suspension on the basis of data analytics and mismatches; minimum cash payment to deter bogus firms; and precise targeting in the interest of small business to maintain the ease of doing business for them.
The stringent measures come in the wake of a nationwide crackdown against the use of fake GST invoices for fraudulently claiming input tax credit (ITC). The nationwide drive started in the second week of November and has resulted in the arrest of five chartered accountants, several masterminds and kingpins having multiple companies for evading taxes. GST enforcement authorities have booked 1,768 cases against over 5,700 entities.
The measures were cleared by the GST Implementation Committee (GIC) following a deliberation among the 10 member States and the Centre’s representatives.
The GST Council’s Law Committee had recommended two-pronged approaches to curb the menace of fake GST bills, strict verification for GST registration and use of data analytics for identification and swift suspension of fake GST dealers that exist in the system.
These measures included the use of biometric-based authentication for GST registration among other things.
Stringent rules for new GST registration
New rules require in-person verification before registration is granted to an applicant. If an applicant opts for Aadhaar based authentication, he will undergo biometric-based Aadhaar authentication at one of the facilitation centres notified by the Commissioner.
If the applicant does not opt for Aadhaar authentication, then for processing the application, biometric information and verification of KYC documents must be undertaken at the verification centres.
This verification process may also include taking photographs and verifying original documents of the applicant uploaded with the registration application.
This amendment will come into effect from a date to be notified in near future after setting up of facilitation centres on the lines of Passport Seva Kendras or Aadhaar Seva Kendras.
“In effect, GST is moving in the direction of better verification regime for registration of new businesses with most steps taken in an automated environment,” said an official.
The new timeline for grant of registration for Aadhaar authenticated applicants is now seven days for proper scrutiny of the application.
To counter the cases of fake invoices, in a few risky cases where a person has successfully undergone Aadhaar authentication, some additional physical verification may be carried out with the approval of an officer, authorized by the Commissioner.
The timeline for grant of registration in such cases would be now 30 days.
Cancellation and suspension
In the new regime, the suspension and cancellations would be based on data analytics and mismatches.
Registration is now also liable for cancellation where the input tax credit is availed in violation of provisions of the CGST Act or the details of outward supplies in FORM GSTR-1 are in excess to the outward supplies declared in FORM GSTR-3B, for one or more tax periods, said officials.
Such cases lead to ITC being passed or availed without payment of tax and would, therefore, be liable for cancellation of registration. During the proceedings of cancellation, these taxpayers would remain suspended.
Officials said if during the comparison of GSTR-3B with GSTR-1 and GSTR-2B of a registered person if significant differences are found then the GST registration could be suspended leading to cancellation.
However, a senior officer will be authorised to revoke the suspension after verification.
Cash reimbursement discouraged
In another important change, the present eligibility limit of availing 10% input tax credit (ITC) by a business in respect of invoices where the details have not been furnished by his suppliers would be reduced to 5% from January 1, 2021.
Also read: Businesses with monthly turnover of over Rs 50 lakh to pay at least 1% GST liability in cash
