Strengthening GST Registration Process to Combat Fake Registrations

The Central Board of Indirect Taxes and Customs (CBIC) in India has initiated a special drive to tackle the issue of fake Goods and Services Tax (GST) registrations, as GST evasion crossed over 1 lakh crore in the fiscal year 2022-23. Non-genuine registrations have been used to fraudulently pass on input tax credit to unscrupulous recipients, leading to a significant loss of revenue. To address this menace, the GST policy wing has recommended amendments to the CGST Rules, 2017, aimed at strengthening the registration process and effectively dealing with fake and fraudulent registrations.

Amendments Proposed by the GST Council:

The following amendments have been recommended to the CGST Rules, 2017:

Furnishing of Bank Account Details (Rule 10A):

The amendment proposes that registered persons, excluding those granted registration under specific rules, must furnish details of their bank accounts within 30 days of grant of registration or before filing the statement of outwards supply (Form GSTR-1/IFF), whichever is earlier. This requirement will help verify the authenticity of registered persons and ensure transparency in financial transactions.

Suspension of Registration (Rule 21A):

Under the proposed amendment, the registration of a person will be suspended if a comparison of their returns with the details of outward supplies reveals significant differences or anomalies indicating a contravention of the GST Act or rules. The registered person will be notified electronically and given 30 days to explain the discrepancies. Additionally, non-furnishing of valid bank account details under Rule 10A will lead to system-based suspension of registration.

Details of Outward Supplies (Rule 59):

To strengthen compliance, the amendment states that a registered person will not be allowed to furnish the details of outward supplies (Form GSTR-1) if they have not filed the return in Form GSTR-3B for the preceding month(s). Similarly, those required to file quarterly returns must first furnish the GSTR-3B for the preceding tax period. Additionally, if an intimation has been issued regarding unpaid taxes, the person must either deposit the specified amount or provide a reply explaining the reasons for non-payment before furnishing the details of outward supplies.

Simplifying Physical Verification (Amendment in Rule 9 and Rule 25):

The proposed amendment eliminates the requirement for physical verification of business premises to be conducted in the presence of the applicant. Instead, physical verification will be carried out in high-risk cases, even when Aadhaar authentication has been completed. This change aims to streamline the verification process and improve efficiency.

Conclusion:

The proposed amendments to the CGST Rules, 2017, are a significant step towards curbing fake and fraudulent registrations in the GST system. By mandating the furnishing of bank account details, suspending registrations based on discrepancies, and ensuring compliance before filing details of outward supplies, the amendments will help strengthen the registration process and promote transparency in the GST regime. Additionally, the simplification of physical verification procedures will enhance efficiency while mitigating risks. These measures are crucial in combating GST evasion and protecting the integrity of the tax system.