In a significant move to combat the rising issue of fake or bogus registrations under the Goods and Services Tax (GST) regime, the Central Board of Indirect Taxes and Customs (CBIC) has issued a comprehensive set of guidelines through Instruction No. 03/2023-GST, dated 14th June 2023. These guidelines, addressed to all Principal Chief Commissioners, Chief Commissioners, Principal Commissioners, and Commissioners of Central Tax, as well as Principal Directors General and Directors General of Central Tax, aim to fortify the process of scrutinizing and verifying applications for GST registration.
Understanding the Menace
The backdrop of these guidelines is the alarming instances of unscrupulous elements exploiting the GST framework by obtaining fake registrations. This illicit practice not only defrauds the government exchequer but also enables the fraudulent passage of input tax credit through the issuance of invoices without any actual supply of goods or services. The gravity of this issue has led to a significant revenue loss for the government.
Modus Operandi and Challenges
The document outlines various modus operandi employed by fraudsters to obtain fake registrations. Instances include the misuse of identities such as PAN and Aadhaar, the use of forged documents like electricity bills and rent agreements to establish the principal place of business, and even the creation of forged identities using the same photograph on different Aadhaar cards under different names. One particularly alarming case involves fraudsters obtaining fake GST registrations by manipulating the phone numbers on Aadhaar cards belonging to economically weaker sections, linking them to dummy mobile numbers using thumb impressions.
Mission Mode Action: Special All-India Drive
To address this growing problem, the CBIC initiated a Special All-India Drive against fake registrations through Instruction No. 01/2023-GST, dated 04.05.2023. This mission mode action involves concerted and coordinated efforts by both Central and State tax authorities.
Strengthening Verification Processes
Recognizing that verification of registration applications is a crucial step in preventing fake registrations, the guidelines emphasize the need to fortify the scrutiny and verification process at the level of tax officers. While policy and system-level initiatives are ongoing, these guidelines provide a detailed roadmap for officers to follow.
Key Guidelines for Verification
The guidelines, outlined in a systematic manner, include:
1. Immediate Scrutiny on Application Receipt
Upon receiving an application for registration, the concerned officer is instructed to initiate the scrutiny and verification process promptly. This involves examining the details filled by the applicant in FORM GST REG-01 and the accompanying documents.
2. Thorough Examination of Documents
The prescribed list of documents in FORM GST REG-01, covering aspects like photographs, business constitution, principal place of business, and bank account details, must be meticulously scrutinized. The officer ensures the legibility, completeness, and relevance of these documents.
3. Targeted Verification Approach
To streamline verification, the Directorate General of Analytics and Risk Management (DGARM), in coordination with GSTN, conducts a risk rating of applications. The risk rating (High, Medium, Low) for each application is made available to CGST field formations in Report Series 400 on the DDM portal.
4. Focus on Risky Cases
Special attention is directed toward cases with a “High” risk rating. Additionally, officers check whether the applicant has obtained registrations on the same PAN earlier, the compliance record of GSTINs linked to the PAN, and specific circumstances like previous cancellations, suspensions, or rejections.
5. Addressing Deficiencies and Seeking Clarifications
If deficiencies are found, the officer issues electronic notices in FORM GST REG-03, seeking clarifications or additional information within the prescribed time limit. This ensures that incomplete or unclear documents are rectified.
6. Careful Examination of Responses
Responses received in FORM GST REG-04 are carefully examined. If the officer is satisfied, approval for registration is granted within the prescribed time period. If not, the application may be rejected, and the applicant is informed through FORM GST REG-05.
7. Physical Verification Process
For cases requiring physical verification, officers initiate the process in accordance with the rules. This includes Aadhaar-authenticated cases and those not opting for Aadhaar authentication.
8. Timely Issuance of Notices
Notices in FORM GST REG-03 are issued electronically within seven working days for Aadhaar-authenticated cases and within thirty days for specified cases, ensuring a timely process.
9. Close Supervision by Higher Authorities
The Principal Chief Commissioner/Chief Commissioner of CGST Zones play a vital role in closely supervising the processing of registration applications within their jurisdictions. Instances of deemed approvals are thoroughly examined, and subsequent remedial actions are taken promptly.
Conclusion: A Proactive Approach to Safeguard GST Integrity
As businesses grapple with the complexities of GST compliance, these guidelines signify a proactive step by the CBIC to safeguard the integrity of the GST system. By strengthening the verification process and introducing targeted measures, the government aims to curb the menace of fake registrations and protect the revenue interests.
For stakeholders facing challenges in implementing these instructions, the CBIC encourages communication through gst-cbec@gov.in.
