GST Clean Up Drive- To Do List and Rights of Genuine Taxpayers

[Vivek Jalan]

The GST Law is becoming more and more stringent for the persons with economically ulterior motives and The Government has made its stand further more clear vide issuance of Instruction No. 01/2023-GST dated 4th May 2023. This Instruction issued by CBIC is on a very serious matter which is impacting the economy adversely and against which the Centre and States have decided to Act in Unison and in a time bound manner. A Special All-India Drive against fake registrations would be affected in 2 months between 16th May 2023 to 15th July 2023 to weed out those GSTINs which are fake and are involved in fake transfer of Credit. It is important to understand the salient features of the Instruction which are summarised as below. However, more important for genuine taxpayers is to ensure that certain errors and omissions which may have been committed by them are sanitized so that they are adequately compliant with the GST Law, procedurally and substantially. We discuss these as below -

I. GST Fake Registrations Clean Up Drive May 2023: Issues & Safeguards -

1. It has been found that in some cases, forged documents, such as forged electricity bills, property tax receipts, rent agreements, etc. have been used as proof of principal place of business to obtain GST registration. The beneficiary/mastermind of a transaction is someone else but on paper it’s another person, sometimes from economically weaker section.

2. It has been found that persons are non-existent at their PPOB (Principal Place of Business) /APOB (Additional Place of Business).

3. A Special Drive to cleanse the system will be taken between 16th May 2023 to 15th July 2023 on the basis of data shared by GSTN; various available analytical tools like BIFA, ADVAIT, NIC Prime, E-Way analytics, etc, as well as through human intelligence, Aadhar database, other local learnings and the experience gained through the past detections and modus operandi alerts.

4. SGST & CGST Departments will work in close co-ordination in the drive. A nodal officer shall be appointed by each of the Zonal CGST Zone and State to ensure seamless flow of data and for coordination with GSTN/ DGARM and other Tax administrations. Recovery can take place in the other state/jurisdiction through Nodal officers appointed for each jurisdiction and an All India Information Sharing Mechanism. The co-ordination shall be done by National Co-ordination Committee at the Highest Level.

5. Actions like suspension/cancellation of GSTIN, blocking of ITC, recovery from recipient, attachment, etc can take place in the matter.

II. Errors & Omissions by Taxpayers to be sanitized -

1. Physical and Documentary Existence at Place of Business -

A. There is No concept of VPOB (Virtual Place of Business) under GST Law. Hence one table space in a business centre should not be used for multiple registrations.

B. If office is shifted permanently please make sure to surrender PPOB (Principal Place of Business) /APOB (Additional Place of Business). If office is shifted temporarily please make sure to add APOB (Additional Place of Business) as well as display requisite information in the earlier POB.

C. Documents u/r 56 of CGST Rules to exist at each PPOB/APOB as per the transactions taking place from there.

D. Ensure to appoint an Authorized Representative for each state and ensure that he/she is present at PPOB/APOB as required.

E. Loading/unloading of vehicles to only happen at PPOB/APOB. They should not happen in an open area which is not registered.

2. “Invoicing without Supply” is an offence under GST even even incase all compliances are done. Especially “Service Providers” need to beware.

3. Both inward as well as outward movement require E-Waybill. Hence E-Waybill reconciliation is to be done with inward as well as outward supplies.

4. Incase Authorised Signatory has changed, please change it on GST Portal.

III. Dos & Don'ts for Stock Keeping under GST – GST proceedings, may result in stock taking at the premises. Regarding stocks, taxpayers make some general mistakes due to which they have to face the wrath of the GST Departments when they invoke Proceedings of accessing the place of business or investigations. It has to be understood that incase a shortage or excess is found by the department at the time of stock taking, then in both these cases GST would be applicable on the value of mismatched stock. Hence the following points are important to note –

A. For All - Do not store stock at a place which is not added in the GST Registration APOB/PPOB.

B. For Manufacturers - Do have a record of not only purchase of Raw Material and closing Stock, but also have records of WIP.

C. For Downstream Products like Scrap - Do not load vehicles on the road or any unauthorized place other than APOB/PPOB.

D. For All - Generate E-Waybill Part-B only after the vehicle is ready for movement.

E. For All - Try to stock lots of material as per your ERP. For example incase one is stocking the same material at different place in different lots, then it is better incase the ERP Stock is also maintained in lots.

F. Ensure Sales Orders are serial numbered - It is seen that many small businesses maintain Customer/Sales Orders on pieces of paper and have no record of serial numbers or orders cancelled or a linking to final invoices made.

IV. Rights and Obligations of Taxpayers –

Even incase the survey does happen to a genuine taxpayer due to certain deficiencies; the following Rights & Obligations of Taxpayers should be noted –

A. Payment on spot/ on day of investigation without SCN cannot be insisted by the Department

B. Incase any statement is taken on co-ersion, the taxpayer is within his rights to retract such a statement

C. The visit of officers in this drive cannot take the form of a Search & Seizure operation unless the procedure under Section 67 is invoked.

D. The taxpayers may File evidences to dis-associate themselves from suspicious transactions

E. The taxpayers should immediately File written submissions, objections with relevant evidences incase the same are available

F. The taxpayers may File Writ incase of dis-proportionate action

G. In case, of any transaction with a third party which is under suspicion and the Department seeks to invoke Section 122(1A), then the same is required to be invoked alleging with evidences as to