GST was introduced to ease compliance burden and promote ease of doing business. Many processes like registration, return filling, notices, etc were made online to fulfil this purpose. Also, strict timelines were fixed on tax officers for completing various processes and tasks. This was a welcome change in Indirect tax system of our country and facilitated responsibility fixing and accountability in tax department.
In case of application for new registration under GST, rule 9(5) gives time period of three working days for tax officer to take action. In case proper officer fails to take any action within three working days from date of submission of the application, the application is deemed to be approved. Such condition is very beneficial for tax payers as it completely eliminates red tapism and corruption. Till now, this timeline was strictly adhered to by GST department and most of the applications were processed in time by officers. Wherever there was delay on part of officers for any reason, GSTN ensured that timelines are followed and deemed approval was granted by system on fourth working day. However, after announcement of lock-down on 24th March 2020, it is observed that applications for registration filed are not processed in time. There is no action taken on such applications for many weeks. This is causing undue hardship to entrepreneurs starting new business and in cases where there is succession of business and new registration is required immediately to continue business. Considering frequent lock-downs in various parts of the countries, we can understand that GST department is not operating at its full capacity. Officers are unable to access their systems due to restrictions on movement and hence they are unable to take action on such applications in time. But question remains is why even GSTN system is not granting deemed approval to registration applications after three working days. Whether GSTN and CBIC has authority to delay approval of registration application beyond 3 working days? In order to get answer to this question, it is interesting to analyse legal provisions and various notifications and other communications issued by CBIC to relax various due dates during this lock-down.
CBIC has issued notification no. 35/2020 on 03rd April 2020 to extend various dates for compliances which fall due between 20th March 2020 to 29th June 2020. Important extract of said notification is reproduced below-
“(i) where, any time limit for completion or compliance of any action, by any authority or by any person, has been specified in, or prescribed or notified under the said Act, which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action, shall be extended upto the 30th day of June, 2020, including for the purposes of—
(a) completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the Acts stated above; or
such extension of time shall not be applicable for the compliances of the provisions of the said Act, as mentioned below –
(b) sub-section (3) of section 10, sections 25, 27, 31, 37, 47, 50, 69, 90, 122, 129;
(d) xxxxxxxxx; and
(e) rules made under the provisions specified at clause (a) to (d) above; “
This notification was further amended by notification no. 55/2020 to extend timelines for these compliances falling due between 20.03.2020 to 30.08.2020 till 31.08.2020. This notification grants additional time for passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called. Hence one may get feeling that department and GSTN is granted extended time to take action on registration applications. However, said notification also carves out certain exceptions to which such extended time shall not be applicable. One such exception is compliances u/s 25 and rules made thereunder. Section 25 deals with procedure for registration and rule 9 made thereunder gives procedure for verification of the application and approval. After reading notification 35/2020, it is clear that section 25 and rule 9 is kept out of these extended timelines and hence period of three working days given by law to grant approval to application is kept intact. Department and GSTN is bound to follow law as they are not granted extended timelines as per notification referred above.
However practically it is observed that registration applications are not processed in time and GSTN has stopped giving deemed approvals. When query was raised to GSTN on this issue, they replied that now period of 60 days is set in system to grant deemed approvals. If officer does not take any action on application for 60 working days, portal will grant deemed approval. Now question which comes before us is from where this period of 60 days coming into picture. Finance Act 2019 has inserted sub section 6A to 6D in section 25 requiring existing registered persons as well as new applicants to undergo Aadhar Authentication for registration. Also, a new proviso is inserted in rule 9(1) by notification 16/2020 dt. 23 March 2020 which says that if a person fails to undergo Aadhar Authentication, then registration shall be granted only after physical verification of the principle place of business not later than 60 days from date of application and rule 9(5) (relating to granting deemed approval after 3 working days) will not apply in such cases. Notification no. 17, 18 and 19 were also issued in this regard and said provisions relating to Aadhar Authentication were made effective from 1st April 2020. In nut shell, if applicant fails to undergo Aadhar authentication, proper officer has 60 working days to make visit and grant approval to registration application. If proper officer fails to take action within 60 working days in such cases, GSTN will grant deemed approval after 60 working days. It is important to note that there is no special facility on GSTN portal to authenticate Aadhar number. We always enter Aadhar number of applicant in registration application, which is verified by GSTN automatically. Hence without enabling facility to authenticate Aadhar number, extended time limit of 60 days cannot be invoked. Also, if we assume that this proviso is implemented by department and mentioning Aadhar number in registration application is not sufficient, then how officers are processing registration applications without visiting principle place of business as mandated by this new proviso? Hence it can be safely concluded that mentioning of Aadhar number in registration application is sufficient compliance of new proviso to rule 9(1) till the time facility of Aadhar Authentication is not made available on portal and in such cases extended time limit cannot be invoked. Deemed approval must be granted within three working days by GSTN.
Now suddenly CBIC has issued letter dated 17th July 2020 to all commissioners stating that to avoid possible mis-use of the deeming provision of granting registrations during COVID lock-down, where either central/state officers are closed or are functioning with skeletal staff, it was decided that deemed approval would not be granted on portal w.e.f. 25th March 2020. Accordingly deemed applications were held up. Lock-down was announced on 24th March 2020 and this letter states that this decision was taken immediately on 25th March 2020. Few important questions which may come to our mind when we read this letter are listed below
This letter mentions that there were no working days during lock-down. However, this letter further mentions that lock-down is lifted in most of the areas from 1st June 2020. So now this letter gives new deadlines to process registration applications as follows
|Date of Filling Applications||Date of deemed approval|
|Applications filled up to 30.06.2020||15th July 2020|
|Applications filled from 01.07.2020 to 28.07.2020||31st July 2020|
|Applications filled thereafter||3 working days (as per law)|
So even if we assume that lock-down days cannot be considered as working days and letter itself mentions that lock-down is lifted from 1st June 2020, then under which authority these new deadlines are prescribed and why limit of 3 working days as per law is not restored immediately remains unanswered.
Many taxpayers have faced several difficulties due to delay in getting GST registrations within reasonable time. New businesses could not commence their operations for want of GST registration. Although concerns raised by CBIC regarding misuse of deemed approval facility are perfectly valid and correct, other safeguards like post registration visits could have served the purpose. Initiatives like Aadhar Authentication are welcome change and will help to reduce menace of bogus registrations, reduce evasion of taxes and strengthen ITC chain. But timely implementation on GST portal is also equally important. Also taking decisions within four corners of law and disseminating proper information to all stake holders is responsibility of government. Such incidences create confusion and cause undue hardship to taxpayers.
|Dispose pending GST registration applications on or before 30th July 2020||CBEC-20/06/11/2020-GST||17/07/2020|