Special Fake Registration Drive- Key Action Points

[NikhilMohan Jhanwar]

Special Drive for Fake Registrations- Mitigating impact on Genuine taxpayers

Recently, CBIC has issued Instruction No. 01/2023-GST dated 04.05.2023 outlining guidelines for launching Special All India Drive against fake registrations. The tax authorities have been proactive to weed out fake GST registrations from system defrauding exchequer in past through extensive use of data analytics and other tools.

Taking one step further, it has been proposed that All India Drive is being launched from 16^th May 2023 to 15^th July 2023 on a mission mode by Central Tax and State Tax Authorities with special focus on cancellation of fake GST registrations and also taking action on blocking of Input tax credit under Rule 86A and recovery of ITC claimed on supplies received from such fake GST registrants by using DGRAM data, BIFA, ADVAIT, NIC Prime, E-Way analytics and human intelligence.

It has been a common trend that any such drive and actions become a nightmare for genuine taxpayers also. For example, if during physical verification, the registered office address is found closed or not found due to non-availability of concerned person or team operating from Work from Home or from co-working space or from residential premises (specially in case of service providers/freelancers), the authorities simply initiate issuing notices for cancellation of GST registration which hampers the business of the taxpayers.

In this Note, we are suggesting some key action points for genuine tax payers to ensure that they navigate any impending risks of cancellation of GST registration due to some reasons:

A. Board and GST Certificate on Wall

As per Rule 18 of CGST Rules, 2017, every registered person is required to display on their principal place of business and every additional places of business following :

1. GSTIN Certificate on prominent location at registered place of business. 

2. GSTIN on the Name Board on the entry of registered place of business. The Name board may contain following things:

(i) Name of firm on which GST is registered,

(ii) Complete address of premises

(iii) GST registration number.

B. Multiple registration on same address

If multiple GST registrations are obtained from same address, it is suggested to clearly demarcate the area in the rent agreements, wherever possible if any space has been given to the registered lessee. For example, if in a warehouse, two registrations are obtained and stock of goods of both registrations are lying, then proper demarcation of area and stock should be ensured.

C. Addition of all places from where supply being made or received as an additional place of business

If any registered persons are having more than one premises from where he is making any supply or receiving any supply or stocking any goods like warehouse, parking space etc., please ensure that these premises are registered in GSTIN as an additional place of business. In case any stock is lying on unregistered premises, it poses risk of seizure of such goods and further, ITC on such stock will be under challenge by the Department.

D. Aadhar Authentication

GST Portal has enabled facility for authentication of aadhar details with GSTIN which is not mandatory as per GST Law except in certain situations of claiming refunds, . However, undertaking authentication strengthen the profile of Taxpayer and it is suggested to undertake aadhar authentication at the earliest.

E. Review of supporting documents for registered places of business

The Taxpayers should review the supporting documents submitted at the time of GST registration or amendment or addition in places of business and ensure that lease agreements/sub-lease agreements and NOC are renewed and proof of ownership (NOC/Electricity Bills/Proper Receipts) are also obtained and maintained at each places of business

F. Maintenance of accounts and records at each place of business

As per Section 35 of CGST Act, 2017, it is mandatory to maintain prescribed accounts and records at registered places of business. The Taxpayers are advised to ensure compliance of the same and maintain details of purchases, outward supplies, ITC and books of accounts.

G. Review of compliance status of supplier of goods or services

The taxpayers should review the GST compliance status of all of their suppliers of goods and services in terms of their GST registration being active, returns filing status of GSTR-1 and GSTR-3B etc. and necessary action should be initiated in case of any lapse on the part of the suppliers as query may be initiated based on compliance rating of your supplier from whom you have made purchases and claimed ITC and such supplier is a defaulter.

H. Consequences of non-compliance

In case, requirements applicable as per GST law are not fulfilled, it may lead to

• imposition of penalty upto INR 50,000/- under Section 125 of CGST Act, 2017. For certain offences, specific penalty is prescribed under Section 122 of CGST Act, 2017.
• Initiation of cancellation of GST registration
• Blocking of Input tax credit under Rule 86A
• Recovery of Input tax credit if availed from any supplier found to be non-existent