The Goods and Services Tax (GST) registration is a crucial step for businesses operating in India, as it establishes their legal recognition and enables them to comply with the tax regime. However, obtaining GST registration in the current scenario poses numerous challenges due to evolving regulatory frameworks, technical glitches, and bureaucratic hurdles. This article discusses into the various difficulties faced by businesses, particularly small and medium enterprises (SMEs), in acquiring GST registration.
1. Stringent Documentation Requirements
One of the primary challenges is the exhaustive documentation required for GST registration. Applicants need to provide:
- Proof of business ownership or lease agreements.
- Identification documents for proprietors, partners, or directors.
- Bank account details and proof of address.
- Photographs of the place of business.
While these requirements aim to ensure legitimacy, they can be burdensome for small businesses and startups that may lack formal lease agreements or established business premises. Numerous cases highlight instances where GST registration applications are not approved due to deficiencies or mismatches in address proof documents. Below are some common examples:
- Electricity Bill Address Mismatch: Many cases have been reported where the address mentioned on the electricity bill does not match the address in the rent agreement, lessee deed, or ownership proof documents. Practically, electricity bills often lack a complete address, mentioning only the area or village name. This discrepancy makes it challenging to convince the GST officer online that the property owner is the same, despite the incomplete address on the electricity bill issued by the electricity department.
- Mismatch Between Rent Agreement and Ownership Proof Address: There are instances where the address provided by the business differs slightly between the rent agreement and ownership proof documents, such as the conveyance deed, water tax bill, or house tax bill. This difference does not indicate a change in the property but arises because the third party drafting the agreement may not ensure an exact match with the ownership proof. Such discrepancies complicate the processing of the application, making it difficult for the officer to approve it in favor of the business.
- Requirement for KYC of Property Owner: During the GST registration process, officers often request the KYC documents (such as Aadhaar or PAN) of the property owner. However, small businesses renting properties may face difficulties in obtaining these documents, as property owners may be unwilling to share their Aadhaar or PAN details. As a result, GST registration applications are frequently rejected due to the absence of the property owner’s KYC.
These examples illustrate some of the hurdles faced by businesses in securing GST registration. Numerous other reasons also contribute to rejections, making it difficult for businesses to comply with tax obligations, start operations, and issue GST-compliant invoices to their customers.
2. Verification Delays
The GST registration process involves physical and online verification of documents and premises. Delays in these verifications often occur due to:
- Overburdened government officials.
- Ambiguities in the documents submitted.
- Inefficiencies in the system for scheduling and conducting physical inspections.
The GST application processing time is generally 30 days, during which the GST officer may conduct a physical inspection of the business premises. The officer may contact the business owner and request them to present the original documents for verification. However, there have been instances where the officer conducts the inspection without informing the business owner beforehand. As a result, the owner may not be present with the original documents during the visit. In such cases, the officer may submit a negative report, leading to the rejection of the GST registration application.
This process can significantly disrupt business operations, as entities without a valid GST registration cannot legally collect GST or claim input tax credits, hindering their ability to function effectively.
3. Technical Glitches in the GST Portal
The GST portal has been notorious for frequent technical issues that hinder smooth registration. Common issues include:
- System downtimes during peak hours.
- Errors in uploading documents due to file size or format restrictions.
- Lack of real-time error rectification mechanisms.
These glitches can lead to repeated attempts and increased frustration among applicants.
4. Rejection of Applications
GST registration applications are often rejected due to minor discrepancies in the submitted information or documentation. Common reasons for rejection include:
- Mismatch in the name or address details across documents.
- Failure to upload clear and legible copies of required documents.
- Errors in KYC details or other critical information.
Reapplying after rejection is not easy, as applicants must address the reasons for rejection and resubmit their application, further prolonging the process.
5. Lack of Awareness and Guidance
Many small businesses and startups lack awareness about the GST registration process and its legal implications. Misunderstandings about the applicability of GST thresholds and procedural requirements often lead to:
- Incomplete applications.
- Delays in starting the registration process.
- Non-compliance with statutory deadlines.
6. Impact of Geographical Disparities
Businesses in remote or rural areas face unique challenges due to limited access to resources and technical infrastructure. Poor internet connectivity, lack of nearby GST Seva Kendras, and insufficient local expertise exacerbate the difficulties of obtaining GST registration.
Conclusion
Obtaining GST registration in the current scenario presents several challenges, particularly for small businesses and startups. While the government’s efforts to streamline tax compliance are commendable, practical hurdles still need to be addressed to make the process more accessible and efficient. To navigate these challenges, businesses often seek the assistance of professionals, such as Chartered Accountants, to file applications and respond to queries effectively.
GST registration has become increasingly time-consuming, with the standard processing period being 30 days. If the officer requests additional documents or resubmission of the application, the processing time extends further, adding to the delays. As a result, obtaining GST registration has become more challenging and time-intensive than running a business itself in some cases.
