We would like to bring to your attention the recently issued Instruction No. 01/2023-GST dated 04.05.2023 by the Central Board of Indirect Taxes and Customs (CBIC), which provides guidelines for a Special All-India Drive against Fake GST Registrations. The aim of this two-month-long drive is to detect cases of fake and suspicious GSTINs that are fraudulently claiming GST Credit (ITC) without an actual supply of goods or services and take necessary actions to curb such malpractices.
It is important to understand that in the GST regime, a taxpayer purchases various commodities and obtains services from a number of vendors in order to supply goods or services to their customers. In the process, the taxpayer pays the price for their purchases and also pays tax in the form of GST. At the time of paying GST on their supplies, they claim a set-off of GST paid on their purchases. However, some unscrupulous taxpayers engage in fraudulent practices by entering contracts for purchase where no actual supply of goods or services takes place. They obtain purchase invoices from fake vendors, transfer the invoice amount, and claim GST credit. The source of such credit is questionable and detrimental to the overall tax system.
As of now, 13.8 million entities are actively registered in India, making it challenging to detect such fraudulent practices. Therefore, the CBIC has launched this special drive employing various data analytics and risk parameter tools to detect and take necessary actions against such unscrupulous activities.
It is important to note that if you have all the legal documents, there is no need to worry about receiving a notice of GST verification. Genuine taxpayers will not be harassed during the verification process.
Things to remember in case you receive the notice: –
· Read the notice carefully and understand its purpose;
· Keep all the documents requested in the notice ready and respond to the notice in time;
· It is also important to coordinate with GST officials and be present at the time of physical verification;
· Display the certificate of registration and GSTIN in a prominent location at your principal place of business and at every additional place of business.
Documents that should be kept ready: –
· Ownership proof if the premises are owned;
· Registered leave and license agreement along with the electricity bill if rented;
· KYC documents
· The GST officials may also ask for additional documents such as sales and purchase registers, copies of invoices duly signed by the authorized signatory, and stock details that can be verified physically, or inspect the manufacturing process.
· Additionally, taxpayers should ensure that any additional place of business has been updated on the GSTN portal and that their GSTIN is displayed on the name board exhibited at the entry of their principal place of business and at every additional place of business. Failure to comply with these requirements may result in suspension of registration and or a penalty of Rs. 50,000/-.
In conclusion, it is crucial for taxpayers to comply with the law and ensure that they have all the necessary legal documents in order to avoid being caught up in the Special All-India Drive against Fake GST Registrations. It is also important to cooperate with GST officials and maintain a respectful and polite demeanour when dealing with them.
Together, we can work towards a more transparent and efficient tax system in India.
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Disclaimer:- This article is for general information purposes only and does not constitute legal advice.
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