The Central Board of Indirect Taxes and Customs (CBIC) has recently issued crucial guidelines in the form of Instruction No. 03/2023-GST, dated June 14, 2023. These guidelines aim to address the rising issue of fake and bogus registrations. CBIC has identified instances where individuals obtain fraudulent GST registrations and misuse them to pass on input tax credit (ITC) without any genuine supply of goods or services. This fraudulent activity not only deceives the government but also causes substantial revenue losses. To combat this threat effectively, the CBIC has implemented few guidelines to strengthen the scrutiny and verification process of GST registration applications.
In this notification the guidelines highlight the prevalence of fake registrations and the issuance of bogus invoices to pass on fake ITC. Fraudsters employ various tactics, including identity theft, misuse of PAN and Aadhaar details, the creation of forged documents, and even exploiting individuals from economically weaker sections. There were instances where fraudsters modified phone numbers on Aadhaar cards and obtained fake GST registrations, exploiting unsuspecting individuals. This alarming trend necessitates immediate action to safeguard the integrity of the GST registration process and protect government revenue.
To mitigate the risks associated with fake registrations, the CBIC has outlined several essential guidelines to be followed uniformly by tax officers. These guidelines focus on improving the scrutiny and verification process of GST registration applications. They are
Upon receiving an application for registration, the concerned tax officer must initiate the process of scrutiny and verification promptly. The officer must carefully examine the application form (FORM GST REG-01) and all the accompanying documents provided by the applicant. The documents should be checked for legibility, completeness, and relevance. The officer should cross-verify the details provided by the applicant with the uploaded documents and authenticate their authenticity. Special attention should be given to the proof of addresses provided by the applicant, and cross-verification from publicly available sources is recommended.
The Directorate General of Analytics and Risk Management (DGARM), in coordination with GSTN (Goods and Services Tax Network), conducts risk rating of registration applications. Each application receives a high, medium, or low risk rating based on data analytics and risk parameters. Tax officers should consider the risk rating provided by DGARM while verifying and processing applications. Particular attention should be given to applications with a high risk rating.
Tax officers should check whether the applicant has obtained previous registrations under the same PAN, either within the same state or in other states. In such cases, the status and compliance record of those registrations should be examined. Special attention is warranted for cases involving canceled or suspended registrations, previously rejected applications, or addresses with high-risk parameters or suspicious documentation.
If any deficiencies or clarifications are required regarding the application or accompanying documents, the proper officer must issue an electronic notice (FORM GST REG-03) to the applicant within the specified time limit. The notice may seek additional information or documents to rectify the deficiencies. The applicant's response should be examined thoroughly by the proper officer.
In cases where the applicant has not undergone Aadhaar authentication or if physical verification is deemed necessary, the officer must initiate the process for physical verification of the business premises. The physical verification report, along with relevant documents and photographs, should be uploaded (FORM GST REG-30) within the prescribed time limit. Special arrangements should be made to ensure timely physical verifications for essential cases.
Proper officers must ensure that applications are processed within the prescribed time limit. Rejection, approval, or queries should be communicated to the applicant within the specified time frame. Negligence on the part of officers should be dealt with strictly. Deemed approval of applications due to officer inaction should be avoided.
By strengthening the scrutiny and verification process of registration applications, the government aims to protect the exchequer and preserve the integrity of the GST system. These guidelines, which make sure that risk assessment, compliance checks, and proper verification procedures, will help identify and prevent fraudulent activities. the Principal Chief Commissioner/ Chief Commissioner of the CGST Zones may closely supervise the status of processing of the applications of registration, including physical verifications, within their zones. Wherever it is noticed that the application for registration has been granted deemed approval, the reasons for the same may be got examined by the Principal Chief Commissioner/ Chief Commissioner for taking subsequent remedial action, if any, in a time bound manner.
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