Strengthening Verification Procedures: Guidelines to Prevent Fake GST Registrations
The issue of fake and bogus registrations in the Goods and Services Tax (GST) system has been a growing concern resulting into fake Input Tax Credit. In response to the same, the tax authorities have recently launched a Special All India Drive against fake GST Registration and in continuation of the same they have again published various guidelines to strengthen the verification process for GST registration applications. In this article, we will explore the various methods used by fraudsters to obtain such fake registrations, the measures being taken by tax authorities to address the problem, and the key guidelines issued to tax officers for processing GST registration applications.
Various modus operandi of obtaining FAKE AND BOGUS REGISTRATION
• Fake/ non-genuine registrations are being used to fraudulently pass on input tax credit to unscrupulous recipients by issuing invoices without any underlying supply of goods or services or both.
• Identities of other persons like PAN, Aadhaar, etc. have been misused without their knowledge to obtain GST registration. Forged documents, such as forged electricity bills, property tax receipts, rent agreements, etc. are also being used as proof of principal place of business to obtain GST registration.
• Forged identities have been created by using same photo of a person on different Aadhaar cards under different names.
• In some cases, it was observed by the Department that some Fake GST Registrations were being taken in the name of poor people and economically weaker people by incentivising them in terms of cash and under guise of various Government Schemes for change in mobile number linked with their Aadhaar Number in fraudulent manner.
Steps taken by central and state tax Authorities to address the problem of Fake Registration
Instruction No. 01/2023-GST dated 04.05.2023 had been issued previously by Central and State tax authorities in the form of a Special All-India Drive against fake registrations. Refer the said Instruction from below link:
https://taxinformation.cbic.gov.in/view-pdf/1000474/ENG/Instructions
On June 14, 2023 again, Instruction No.03/2023-GST has been issued for verification of applications for registration by the proper officers with respect to guidelines for processing of applications of GST Registration. Refer the said Instruction from below link:
https://taxinformation.cbic.gov.in/view-pdf/1000479/ENG/Instructions
To strengthen the process of verification of GST registration applications and to safeguard against fake GST registrations, following major guidelines have been issued to tax officers:
• On receipt of the application for the registration, the tax officer shall initiate the process of scrutiny and verification of the details filled by the applicant and the documents uploaded by the applicant.
• The GST officer should carefully review the information provided by the applicant in the application in order to compare and cross-verify it with the uploaded papers and to determine the applicant's validity and authenticity.
• The uploaded address proof of principal place of business may be cross-verified from the publicly available sources, such as websites of the concerned authorities such as land registry, electricity distribution companies, municipalities, and local bodies, etc to the extent possible.
• The proper officer shall check the risk rating (High/Medium/Low) made available by the Directorate General of Analytics and Risk Management (DGARM) in respect of the concerned ARN and take the same into consideration while verifying and processing the said application.
• Special attention needs to be paid by the tax officers to the cases where “High” risk rating has been assigned to an ARN.
• The proper officer may also check whether the registration(s) has been obtained on the same PAN earlier, either within the same State or other State(s).
• The proper officer may also give due consideration and special attention to the cases such as registration obtained on the PAN of the applicant which has been Cancelled/Suspended/Rejected previously and also check if any risk for place of business is there on the basis of various risk parameters.
• Where the application is found to be deficient, he shall issue a notice to the applicant electronically within the prescribed time limit in Form GST REG-03.
• The proper officer may seek clarification/information/documents inter alia in the following cases:
(i) where any document is incomplete or not legible, the proper officer may seek complete or legible copy of the same.
(ii) where the address of place of business does not match with the document uploaded by the applicant, or where such uploaded document does not appear to be a valid proof of the address of the said place of business, the proper officer may seek additional documents to confirm the address details.
(iii) where the address of place of business is incomplete or vague, the proper officer may seek complete and unambiguous details of the address along with the corresponding documentary proof.
(iv) where any GSTIN linked to the PAN of the applicant is found cancelled or suspended, the proper officer may seek clarification or reasons for the same from the applicant, if required.
• If the proper officer is satisfied with the reply furnished by the applicant in response to notice issued in Form REG-03, he may approve the grant of registration to the applicant within the prescribed time period and if not satisfied with reply or where no reply is furnished, he may reject such application by recording the reasons in writing in Form REG-05.
• Where the applicant has either failed to undergo authentication of Aadhaar number or has not opted for authentication of Aadhaar number, the proper officer shall immediately initiate the process for physical verification of the place of business.
• Even in cases where the applicant has undergone authentication of Aadhaar number, if the proper officer is of the opinion that physical verification of the place of business is essential, he may get such physical verification conducted in a time bound manner to verify authenticity of the applicant.
• Physical verification of the place of business was not conducted before granting registration in case of registration granted on deemed approval basis or granted in cases covered under “High” risk rating then in such cases, officers are required to do physical verification within 15 days of such registration.
Conclusion
The guidelines with respect to processing of application of GST registration issued by tax authorities provide a comprehensive framework to tackle the issue of fake GST registrations and to safeguard the interest of the revenue. These guidelines emphasize the importance of rigorous scrutiny, verification, and cross-verification of applicant details and uploaded documents. The added risk ratings, consideration of previous registrations and risk parameters in High/Medium/Low ratings, and the conduct of physical verification where necessary, aim to strengthen the GST registration application verification process and safeguard against fraudulent and such fake registrations, ultimately ensuring the integrity of the GST system.
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