INSTRUCTIONS REGARDING CARE TO BE TAKEN DURING THE PROCESS OF REGISTRATION, CANCELLATION OF REGISTRATION, AND REVOCATION OF CANCELLATION OF REGISTRATION OF FAKE TAXPAYERS UNDER GST
These instructions have been issued to prevent fake GST registrations and weed out existing fake registered taxpayers. Although these instructions are issued by the State Tax Department of Odisha, they can be applicable to both authorities and stakeholders.
The Detailed Instruction is as follows:
The Commissionerate of CT & GST, Odisha, Finance Department, has issued the above instruction vide No. CCT-PEI-POL-0155-2021/7869/CT&GST dated May 10, 2023. These instructions were initially issued through this office letter No. 7635/CT & GST dated June 11, 2019, to monitor the registration process diligently, both during the grant of registration and post-registration, in order to prevent fake registrations and bogus invoicing. For the readers’ benefit, let us present Rule 9 and Rule 25, which relate to deemed approval of registration and physical verification of business premises in certain cases, respectively.
As per Rule 9 of CGST Rules, 2017, Verification of the Application and approval:
(1) The application for new registration shall be forwarded to the proper officer, who shall examine the application and the attached documents. If they are found to be in order, the grant of registration shall be approved by the proper officer within seven working days from the date of application submission.
Provided that where –
a. a person, other than a person notified under sub-section (6D) of section 25, fails to undergo authentication of Aadhaar number as specified in sub-rule (4A) of rule 8 or does not opt for authentication of Aadhaar number;
(aa) a person, who has undergone authentication of Aadhaar number as specified in sub-rule (4A) of rule 8, is identified on the common portal, based on data analysis and risk parameters, for carrying out physical verification of places of business; or
b. the proper officer, with the approval of an officer authorised by the Commissioner not below the rank of Assistant Commissioner, deems it fit to carry out physical verification of places of business,
the registration shall be granted within thirty days of submission of application, after physical verification of the place of business in the presence of the said person, in the manner provided under rule 25 and verification of such documents as the proper officer may deem fit;
(2) Where the application submitted under rule 8 is found to be deficient, either in terms of any information or any document required to be furnished under the said rule, or where the proper officer requires any clarification with regard to any information provided in the application or documents furnished therewith, he may issue a notice to the applicant electronically in FORM GST REG-03 within a period of seven working days from the date of submission of the application and the applicant shall furnish such clarification, information or documents electronically, in FORM GST REG-04, within a period of seven working days from the date of the receipt of such notice.
The time period of seven days will be substituted by thirty days and FORM GST REG-03 may be issued not later than thirty days from the date of submission of the application in the cases where a person is covered under proviso to sub-rule (1)
Explanation. – For the purposes of this sub-rule, the expression “clarification” includes modification or correction of particulars declared in the application for registration, other than Permanent Account Number, State, mobile number and e-mail address declared in Part A of FORM GST REG-01.
(3) Where the proper officer is satisfied with the clarification, information or documents furnished by the applicant, he may approve the grant of registration to the applicant within a period of seven working days from the date of the receipt of such clarification or information or documents.
(4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he may, for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05.
(5) If the proper officer fails to take any action, –
a. within a period of seven working days from the date of submission of the application in cases where the person is not covered under proviso to sub-rule (1); or
b. within a period of thirty days from the date of submission of the application in cases where a person is covered under proviso to sub-rule (1); or
c. within a period of seven working days from the date of the receipt of the clarification, information or documents furnished by the applicant under sub-rule (2),
the application for grant of registration shall be deemed to have been approved.
As per Rule 25 of CGST Rules, 2017, Physical Verification of Business Premises in certain cases:
Where the proper officer is satisfied that the physical verification of the place of business of a person is required due to failure of Aadhaar authentication or due to not opting for Aadhaar authentication before the grant of registration, or due to any other reason after the grant of registration, he may get such verification of the place of business, in the presence of the said person, done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the common portal within a period of fifteen working days following the date of such verification.
Many GST Registrations have been obtained without being in physical existence and have issued fake invoices without actual supply of Goods. Due to this negligence of concerned proper officer, who is in-charge of registration, within the prescribed time, approx 1168 GST Applications for registration have been approved automatically (deemed approval) during the FY 2022-23. Out of these deemed approved registrations, approx 120 registrations are found to be fake and these Registrations have been cancelled suo-motto by the Registering Authorities.
The reason behind the deemed approval is absence of timely action by the Proper Officer. In many cases, the proper officers were attending the Registration Applications on the last date and they used to transfer these cases to another Circle/Proper Officer at the very last moment, which becomes the main reason for deemed approval of Registrations applications.
It was also found that when a proper Officer went on leave for more than 2-3 days, the Circle Officers would not ensure that the charge/work assignment of that Proper Officer is transferred to another Officer in time. Due to such inadvertence, the applications assigned to that Officer which were on leave, get deemed approved and such Laxity on the part of the Circle Heads is not acceptable.
The Timely and Proper Action of the proper officer in terms of examination of information and documents furnished is required at the time of receiving application for Registration and immediate physical verification of business premises post registration is very crucial to prevent grant of Registrations to Fake Entities.
In order to achieve the above objectives, The Circle Heads has issued Instructions which are to be followed by the proper officers who are in charge of registration.
A. PRE-REGISTRATION STAGE:
i. No application for new registration is allowed to be deemed approved due to inappropriate action of the proper officer within the time prescribed under Rule 9 of CGST Rules. If in any case any new application for registration is deemed approved, the concerned proper officer will be held responsible.
ii. In case where the applicants have not opted for Aadhaar Authentication at the time of application for registration, the Registration will be granted only after the physical verification of the business premises by the proper officer in terms of proviso (a) to Rule 9(1) and Rule 25 of CGST Rules.
iii. In cases where the applicants have opted for OTP Based Aadhaar Authentication, the proper officer should physically verify the business premises of the applicants based on Data Analytics and Risk Parameters in terms of Rule 9(1)(aa) and Rule 25 of CGST Rules.
iv. In the cases where the applicants have successfully authenticated Aadhaar through OTP and if the proper officer find it fit to cause physical verification of the business premises, upon examination of information and documents furnished in the application, they may do physical verification in some deserving cases with the approval of their Circle Head in terms of Rule 9(1)(b) and Rule 25 of CGST Rules.
B. POST-REGISTRATION STAGE:
i. Where the applicants have successfully authenticated Aadhaar though OTP and the proper officer has not visited the business premises earlier, the Proper Officer should order for immediate physical verification of the business premises of the Registered Taxpayers in accordance with Rule 25 of CGST Rules.
ii. The Proper Officer should order for immediate physical verification of the business premises of the registered taxpayers in case of receipt of any information/leads/report from the EI/Enforcement Section of the Commissionerate.
iii. The proper officer shall initiate suo-moto cancellation proceedings against such fake registered taxpayers upon receipt of the information about non-existence of that registered taxpayers in accordance with the provisions of Section 29(2) of CGST Act following the principle of Natural Justice, that means after giving opportunity of being heard. It is to be ensured that the cancellation of registration of fake registrants may be done retrospectively from the date of registration. This would result in disallowing all the ITC, those Registrants have passed on till now.
C. REVOCATION OF CANCELLATION OF REGISTRATION/MULTIPLE REGISTRATION:
i. Proper Care should be taken by the proper officer in the case of application for revocation of cancellation of registration have been submitted by the applicant, whose registration has been cancelled on the ground that they are not physically existed, may be considered for rejection following the principle of natural justice. Again, opportunity of being heard is given to the Registrants.
ii. In case the fake entities will apply for fresh registration instead of Revocation of cancellation of old registration, proper care should be taken that their application for Registration may be rejected only after physical verification of the business premises of the applicant following the principles of Natural Justice. The proper officer should check the reason of cancellation of that old registration.
The Circle Heads are instructed to observe the above Instructions issued for Registration process so as to prevent Registration of fake entities and also to weed out the existing fake registered taxpayers. It is also instructed that while following these instructions, no bona fide taxpayer should be put to any kind of molestation keeping in mind the mandates under “Ease of Doing Business” initiative. Further, The Circle Heads and Range Heads are instructed to ensure that in case if Proper Officer is on leave, the Charges of that officer should be transferred or de-allocated to another officer so that the question of deemed approval will not arise any more in future.
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