Representation on hardships being faced in obtaining new GST registration

Representation with respect to hardships being faced while obtaining new GST registration number & Request to issue suitable SOP and Trade Notice or Circular or Guidelines with respect to new GST registration by All Gujarat Federation of Tax Consultants and Income Tax Bar Association, Ahmedabad.

ALL GUJARAT FEDERATION OF TAX CONSULTANTS 303, B wing, Pratyaksh Kar Bhavan, Nr. Panjrapole, Ambawadi, Ahmedabad-380 015 Ph.: +91 98255 65282 e-mail : sec.agftc@gmai.comwebsite : www.agftc.in

INCOME TAX BAR ASSOCIATION, AHMEDABAD Room No. 40, Aayakar Bhavan, Navrangpura, Ahmedabad – 380 009 Ph.: +91 98250 72194, 079 4801 1947 e-mail : itbarassociation@gmail.com website : www.incometaxbar.org

To,
Smt. Nirmala Sitharaman
Minister of Finance and Corporate Affairs,
Government of India
E-mail ID: fmo@nic.in

Shri Kanubhai Desai
Finance Minister,
Government of Gujarat
E-mail ID: min-fin@gujarat.gov.in

Shri Vivek Johri
Chairman
Central Board of Indirect Taxes and Customs
E-mail ID: chmn-cbic@gov.in

Date: 25^th January, 2022

Respected Sir(s) / Ma’am

Subject: Representation with respect to hardships being faced while obtaining new GST registration number & Request to issue suitable SOP and Trade Notice or Circular or Guidelines with respect to new GST registration.

Greetings from the All Gujarat Federation of Tax Consultants and Income Tax Bar Association, Ahmedabad.

All Gujarat Federation of Tax Consultants (AGFTC) established in the year 1992, is the first & only Apex Regional Body of Advocates, Chartered Accountants & Tax Practitioners of Gujarat, having membership strength of 1500 professionals and Institutional membership of 34 from all the Districts of Gujarat.

Income Tax Bar Association is one of the first professional associations established in the year 1947, and composed of tax professionals, Advocates & Chartered Accountants as members, with membership strength of approx. 950 from all over Gujarat.

The prime objective of both these Associations is not only to work for the cause of its professionals but also to educate the public at large and to act as a catalyst between Citizens & Government Authorities. AGFTC regularly organizes seminars, lectures on tax advocacy and legal awareness in Mofussil regions across Gujarat.

ABOUT GST & GST REGISTRATION PROCESS

As we all are well aware that GST is backbone of all businesses. For any activity from Manufacturing, Trading to Service providers, obtaining GST number is necessary to carry out business and grow it. Also, these GST registered persons contribute directly to the revenue of the exchequer and GDP of the nation.

Post introduction of GST in July, 2017, all the application for obtaining new registration number has to be done through common portal of GST (www.gst.gov.in), which is a centralized portal for entire India. The form provides fields for various information required for obtaining GST registration, uploading documents in form of Registration Certificate, Photo of Responsible Person(s), Letter of Authority or Resolution (if applicable) and Address Proof of Principal Place of Business and Additional Place of Business with limit ranging from 100 KB to 2 MB for various fields and subject to selection of document type.

Apart from that, it requires OTP based validation of Primary e-mail ID & Mobile Number and verifies details of PAN of each and every person from the CBDT database. Also, there is an option to submit the application with Aadhar Verification (e-KYC) of Primary Authorized Person through UIDAI database.

This application then goes to workflow of an officer of SGST or CGST having jurisdiction as mentioned in the application (based on the location of principal place of business) and the officers have powers to grant registration based on submitted application and attached documents or to raise queries and ask for further documents with respect to such registration or reject the application for registration.

The time period for approval or seeking additional information / clarification / documents relating to the application is 7 (seven) working days from the date of submission of the application in case of Aadhar authentication and 30 (thirty) working days in cases where Aadhar authentication is not opted for.

MAJOR ISSUES BEING FACED WHILE OBTAINING REGISTRATION

We wish to bring to your notice about the major issues being faced by all the tax professionals and persons who are applying for registration under GST Act.

1. Fixed Application Form with Limitations: The application form has fixed fields to provide details and limits size of documents to be uploaded. For most of the fields it is 100 KB. For uploading documents in supporting of principal place of business it is 100 KB for electricity bills etc. and 2MB for rent agreements etc.

 Thus, a person can provide a very limited details at the time of application, even though he / she is able to provide more details, which is generally asked by officials of the department.

2. Legible Documents and Scanning Limits: Scanning documents and resizing the same in 100 KB or 2 MB is not an easy task for most of tax professionals and persons where it is not even technically possible to scan or reduce the clear and legible copies of rent agreements, lease deeds and other documents which can give details about ownership of the property, which due to legal provisions runs in to multiple pages.

It requires moderate technical knowledge and good and advanced hardware in form of scanners, which can provide such small sized legible scanned copies under 2 MB. It is too difficult for everyone and especially those belongs to the bottom of the pyramid.

3. No Definite List of KYC / Registration Documents: There is no definite list of KYC documents for ID & Address & Business Registration documents provided in GST. This adds another issue where officials ask for KYC documents as per their own wish even though valid KYC / Registration documents are already submitted by the person.

As an interesting example – under ease of doing business, the Ministry of Corporate Affairs has integrated registration under GST Act, PF, ESIC along with incorporation of company (through form AGILEs). There are numerous cases, where SGST officers have raised query or even not granted GST registration over the same documents on which Company is Incorporated after inspection of documents by MCA.

4. Officers asking for Irrelevant Details / Documents: The recent experience of all the tax professionals are almost similar where an application is made, the notice seeking clarification or additional information, or documents is issued with few totally irrelevant details asked for. In fact, each officer is asking details and documents as per whims rather than application of mind.

Few of the examples are quoted here:

• Please provide business experience of the proprietor
• Please provide business details in brief
• Please provide brief description of services
• Please upload Aadhar Card & PAN Card Copy
• Please upload Residential Premises proof document (Electricity Bill, Index Copy, Municipal Tax Bill etc.)
• Please upload Notarized Rent Agreement / Consent Letter
• Please upload Notarized ID Proof / Original Copy of ID Proof / Self Attested Copy
• Please upload Police Verified Rent Agreement
• Please provide Authorized Representative Letter
• Please upload legible copy of Rent Agreement / Electricity Bill

The list is much longer as there is no end. We have attached sample of such notices collected from members of the associations for your reference and to highlight the gravity of the situation where we are moving exactly 180-degree opposite to ease of doing business even before one get the most basic registration for carrying business.

We want to emphasize here that all the questions are irrelevant as well as outside scheme of registration under GST, where fields for such things are NOT PROVIDED AT ALL.

5. Issues at the time of Spot Visit: The officers doing spot visit also asking for documents in irrational manner. Every officer has his own list in absence of standard set of documents list required. There are instances reported by the members that the businessmen are asked to get their photos captured with the business premises at the time of spot visit. Also there are cases that visit is done at odd hours and when premise are closed, applications are rejected.

6. Registration not Granted on Residential Premises: The officers turn harsh and reject the applications seeking GST registration at the Residential Premises. Especially in case of service providers, who does work from home and provide services, who even do not need to use commercial premises at all, face troubles due to the same. Even in some of the cases, “NOC from secretary of the residential society”, “Permission from municipal corporation to perform commercial activity from residential premises” etc. are also being asked.

Also, this demand from the officers of the GST department is violation of Article 19(1)(g) (Right to practice any profession or to carry on any occupation, trade or business to all citizens). The applicant may be required to obtain Shop & Establishment or Professional Tax, or Similar registration as may be required by local body but asking for Commercial Tax Bill or Electricity Bill is totally outside purview of the officers of GST.

7. Extreme Delay in Granting Registration: GST registration is one of the most basic requirements of carrying out business. It is the fiduciary duty of the officers too to support the environment in which trade or business or profession can grow without any hindrance. However, for most of the cases, the businessmen face bad experience on very first point – GST registration. In almost all cases, the notice seeking clarifications is issued by default, which unnecessarily extends the time limits stipulated (7 working days) even without fault of the person.

ISSUES FACED BY DEPARTMENT

While representing the issues at local level, the common answer from officers is that this exercise is done to stop dummy registrations which fuel the issue of Bogus Billing faced by the department and it is indeed a very serious issue.

However, this exercise turns nightmare for trade and business at large. As an accepted principal in criminal law, it is better that ten guilty persons escape than that one innocent suffers. However, when it comes to GST, it is sufferance for 99 so that one with mala fide intention can be prevented.

When we are in 21^st century and Government is pushing Artificial Intelligence & Risk Management as inbuilt tools for the tax compliance systems, rather than making things complicated for all, proper verification and risk management system can be in place to avoid such incidents.

OUR SUGGESTIONS

To strike balance between miseries of the taxpayers & tax professionals and problem of department, we suggest that –

1. Issue SOP and Trade Notice / Circular / Guidelines: One of the easiest solutions, which can be implemented easily is to issue SOP and Trade Notice / Circular / Guidelines which is binding to officers and also can clearly give clear picture before applying for new GST registration, where requirements will not be generated out of nowhere. To bring to your notice, before GST, there was a trade notice (Trade Notice No. 16/ST/2012) was issued, where proper procedure was laid down alongwith list of documents and check-list. Similar type of action by even State GST Department will ensure that queries raised will be reduced considerably.

This SOP and Trade Notice should clear some prevailing issues, which can be resolved with clarity and will help in making entire process effective and efficient. A suggestive and non-exhaustive list –

• Identity Proof, Address Proof – Any one or two out of the list should suffice. To clear, what kind of documents will not be acceptable should be suggested.
• Ownership proof & address proof are burning issue. At times ownership is of relative. There is an understanding, but consent is not accepted. Shop & Establishment or Professional Tax are not applicable everywhere. In Gram Panchayat, proof are given which are hand written. The communication addresses are not always same for Electricity Bill, Municipal Tax or Index Copy as electricity company, Municipal Corporations or land revenue offices write addresses in their prescribed manner and person applying for registration is not having control over it.
• It is not mandatory to get any contract or consent notarized in any respective act by state, however officers ask for Notarized copies of Rent Agreement, Consent Letter, Consent from Blood Relative only etc. A proper clarity on the same is desirable. In most of the cases, under other laws, self-certified documents are valid and accepted.
• A suggested format of consent letter along with required Identity & Address Proofs shall be provided so that it becomes easy for both person registering for GST & for department and reduce notices for clarification or rejections.
• Areas falling outside city and in remote area or even GIDC do not have addresses like properties or land situated in city or towns or villages. There are survey numbers and village name only for the entire address and no further full address possible. A lot of queries are raised in this regard, for which there is no practical solution available. Officers should understand the situation and do not discard such cases without fact verification.
• In case of new business is started at Factory / Office for which Ownership is yet not transferred & Only Agreement to sale is being entered by buyer and seller, In such cases, It is difficult to produce Ownership document in name of the taxpayer (Buyer), officers often denies & raise query regarding Ownership proof. Electricity Bill or any other proof is in name of the previous owner. For such cases, Banakhat (Agreement to Sale) and some other additional proof may be allowed as proof of place of business.
• In case of death of Proprietor, if business is continued by Son / Daughter, they ask for consent letter for use of premises if the place is jointly held. Even, it is difficult to give documents of ownership in name of Son / Daughter as transfer of ownership in heritance is yet to be performed. Also, it becomes impossible to perform these tasks in such a short span, when business needs to be continued immediately after death. It is suggested that for death of proprietor, there should be specific list which can help heirs to continue business without interruption and they can provide the documents with required changes after a reasonable time of say 120 days.
• For doing business from Residential Premises, the officers should have lenient view. An additional list or even declaration may be proposed, but denial to grant registration is totally unconstitutional. 

2. Provide Space in GST Registration Form to Upload Documents: In almost every case, the queries related to uploading PAN & Aadhar are found. In the registration form, the provision of mandatory upload of self attested / colour scanned copies of PAN & Aadhar Card shall be available. Also UIDAI & Income Tax Department both provide e-PAN & e-Aadhar & even masked e-Aadhar with VID. If officers are not comfortable accepting the same, the same should be specifically mentioned in the trade notice so that the same can be avoided from very first place.

Similarly, for Shop Establishment, Professional Tax and other registrations, there is an optional fields, which do not provide any space to upload supporting documents. The upload facility shall be provided so that to reduce query.

Also for uploading documents like lease deed, sale deed of land with Index etc. the upload limit needs to be increased from 2 MB to 10 MB.

We understand that this is a centralized form, so it might take time. Meanwhile as a suggestion, the officers should be allowed to accept and download documents from link of cloud services like Google Drive, Microsoft OneDrive or DropBox, link of the same can be provided in attached documents. Alternatively, there should be a dedicated e-mail ID where all the documents can be shared with ARN number as subject, which might help to get documents with larger size. It will reduce the problems related to large sized documents and legible documents. As a risk management practice, a rule of in-person verification of original documents shared through cloud link at the time of spot visit can be provided.

3. Irrelevant Questions needs to be stopped: Officers asking for experience to carry business, business details in brief, another address proof even where one valid address proof is uploaded, details about goods & services etc. should be stopped and relevant instruction may be issued. This will bring transparency and also unnecessary time wasted in getting registration. It is not necessary to have formal qualifications, educational background or even experience to start any business.

4. Queries needs to be raised in Clear Language: At times, the notices seeking clarification contain words like “documents not appropriate” or “upload resident proof documents” or “provide original copy of PAN / Aadhar” are bearing no proper meaning or directing to provide specific details. When we are dealing in a matter related to an Act, the question must be proper, specific and should be having definite meaning on interpretation.

 5. Spot Visits: Spot visit is a good tool for risk management and to authenticate information. But it requires a clear SOP where scope for spot visit, timings, pre-information and co-ordination through call, documents to be produced etc. should be provided to avoid confusions and smooth process.

JUDICIAL REFERENCES

There are recent judgements of Hon. Allahabad High Court and Hon. Gujarat High Court, which has taken note and commented upon the actions of the officers in serious manner and in harsh words.

In Ranjana Singh Vs Commissioner of State Tax (Allahabad High Court), WRIT TAX No. – 1084 of 2021, where all the documents as required under the Act and law as well as in compliance to the show cause notice were furnished by the petitioner and without pointing out any defect or short coming therein, the application was rejected, the Hon. Allahabad High Court Noted that –

“19. Before parting with the judgement, the Court is constraint to observe that the two authorities of the State have acted only with a view to harass the petitioner which cannot be accepted at any cost. This attitude of the respondents in this petition cannot be tolerated as the officers are being State functionary has to act fairly and their action must be in consonance with the provisions of the Acts as well as Rules.”

Also, taking tough stand, the Hon. Allahabad High Court imposed cost of Rs. 15,000, which could be recovered from the erring officer.

Similarly, in the case of Vageesh Umesh Jaiswal Vs State of Gujarat, R/Special Civil Application No. 19176 of 2021 (Gujarat High Court), in a different case of cancellation of registration, the Hon. Gujarat High Court noted that –

“6. We are sorry to say that the Commercial Tax Officer has not only cut a sorry figure for himself but has also made a mockery of justice. He has also made a mockery of the provisions of law. If such is the understanding of the Commercial Tax Officer, then he does not deserve to remain in office even for a day. We are constrained to use some harsh words because this is a common feature. Everyday we come across matters of the present type and the officers are not ready to understand.”

REQUEST

When India is growing at the fastest rate and aiming at USD 5 Trillion Economy, when Government under able leadership of Hon. Prime Minister Narendra Modi is committed to provide Ease of Doing Business and Minimum Government Maximum Governance, it is really sad to see officers of the department delaying registrations and creating unnecessary queries, most of which are just due to lack of clarity. Gujarat is always been a state which supports entrepreneurs and is being considered as the Growth Engine. Support from Government officials in such burning issue will definitely boost morale of businesses.

It is our humble request on behalf of taxpayers and tax professionals of entire Gujarat that issuance of a proper SOP and Trade Notice / Circular / Guidelines is need of hour and needs to be issued on extreme priority basis.

Also on behalf of the fraternity of tax professionals, we AGFTC & Income Tax Bar Association offer support to the GST Department & Finance Ministry in form of inputs in drafting and issuing such SOP and Trade Notice / Circular / Guidelines.

ENCLOSED

Samples of Notices issued for Seeking Additional Information / Clarification / Documents relating to Application for Registration (total 17 notices) received from the members of the association.

Yours Truly,

For and on behalf of

All Gujarat Federation of Tax Consultants

Adv. Kartikey Shah President

Dhruvin Mehta Hon. Secretary

Adv. Bharat Sheth Chairman – Indirect Tax Committee

Income Tax Bar Association, Ahmedabad

Adv. Mrudang Vakil President

CA Shridhar Shah Hon. Secretary

Adv. Dhruven Shah Chairman – Representation Committee

Place: Ahmedabad

Copy to:

Shri Milind Torawane
Chief Commissioner of State Tax
State Tax Department, Gujarat (SGST)
E-mail ID: commi-stax@gujarat.gov.in

Smt. Seema Arora
Chief Commissioner of Central Tax
Ahmedabad Zone, Gujarat State (CGST)
E-mail ID: ccu-cexamd@nic.in