Since the implementation of GST, issuance of fake invoices, i.e., issuance of invoice without underlying supply of goods and services, has increased substantially to pass on the fake ITC of the firm. This transactions are causing huge revenue loss to the government.

Government has already taken various steps to deal with such dealers such as Penalties and Arrests by the Anti Evasion wing, Special drive to physically verify the identified places to check whether such places exist or not etc.

A further step in this direction, CBIC has issued instructions to the GST officials to become more digital at the initial stage itself of GST registration itself. Most of the bogus firm registration can be avoided at this point only. For this purpose, a detailed instructions are issued vide Instructions No. 03/2023-GST dated 14th June, 2023.

This article will provide you a detailed insight of instructions given for GST registration:

1. Modus Operandi of obtaining fake registration

CBIC has identified various manner of obtaining fake GST registration such as:

1. Identities of other persons like PAN, Aadhaar, etc. have been used to obtain GST registration without their knowledge.
2. To substantiate the principal place of business, forged documents, such as forged electricity bills, property tax receipts, rent agreements, etc. are used.
3. Forged identity cards created using the photo of one person on different Aadhaar cards under different names. 
4. In one of the cases detected recently, fraudsters obtained fake multiple GST registrations by using PAN and Aadhaar number of persons from economically weaker sections. They linked dummy mobile numbers to their Aadhar card by taking them to the Aadhar Seva Kendra in return for a nominal cash amount.

To address this problem of fake registration and fake input tax credit, CBIC has initiated a special All India drive against fake registrations vide Instruction No. 01/2023-GST dated 04.05.2023.

2. Detailed verification of Application for GST registration

As per CBIC, now one of the most crucial step is verification of GST registration application in detail to prevent registration of such kind of firms. Despite numerous initiatives have been undertaken on the policy and systems level, it is pertinent to strengthen the process of scrutiny and verification of registration applications in following manner:

2.1 Verification of Application and Documents attached to Application of GST registration

• Upon receipt of application of GST registration on ACES-GST Application, the concerned officer shall Immediately initiate the process of scrutiny and verification of the information furnished in application and attached documents.

• The concern officer shall carefully scrutinize the documents attached to GST registration application to ensure legible, complete and relevant such as:
  • photograph, 
  • constitution of business, 
  • principal place of business, 
  • bank account, etc. 

• Details furnished in the registration application should be carefully examined to check their completeness. Proper officer may also correlate and cross-verify the same with the uploaded documents to check the authenticity of the applicant. 

• Documents of principal Place of business and additional places of business should be scrutinized closely to verify the completeness and correctness of address of such places of business. 

• Further, authenticity of documents furnished may be cross-verified from the publicly available sources, such as websites of the concerned authorities such as land registry, electricity distribution companies, municipalities, and local bodies, etc. 

2.2 Risk rating of GST Registration Application

• In order to facilitate a targeted approach,the Directorate General of Analytics and Risk Management (DGARM) is conducting risk rating of the GST registration applications.

• Risk in form of High, Medium and Low risk rating is assign to each application based on data analytics and risk parameters and such rating shall be made available to the CGST field formations on regular basis. 

• The proper officer shall take such rating into consideration while verifying and processing the said application. 

2.3 Course of Action in case of “High” Risk cases

• Proper Officer is required to give special attention to the cases where “High” risk rating has been assigned.

• In such cases, proper officer may check:
  • Whether any GST registration is obtained for same PAN earlier, either in same State or other State.
  • If so, what is the status of such GSTIN as well as compliance record of such GSTINs may also be checked from the portal. 

• The proper officer is required to given special attention to the cases involving following circumstances:
  • where any registration obtained on the same PAN has been cancelled previously; 
  • where any registration obtained on the same PAN is suspended at the time of verification of a new application of registration; 
  • whether any application on the same PAN has been rejected previously; 
  • whether the place of business of the applicant appears to be risky based on local risk parameters; 
  • whether the proof of address of place(s) of business prima facie appears to be suspicious/ doubtful on the basis of scrutiny of the application and the documents. 

2.4 Notice to furnish additional information in Form GST REG-03

• If proper officer find application is deficient in terms of information or document; or where the proper officer requires any clarification with regard to any information or documents, he shall issue the notice in form GST REG-03;

• the proper officer may seek clarification or information or document(s) in the following cases:
  • In case of incomplete or not legible, complete or legible copy of the same. 
  • In case, address of place of business does not match with the document uploaded by the applicant, or where such uploaded document does not appear to be a valid proof of the address, the proper officer may seek additional documents to confirm the address details. 
  • In case where address of place of business is incomplete or vague, the proper officer may seek complete and unambiguous details of the address along with the corresponding documentary proof. 
  • where any GSTIN linked to the PAN of the applicant is found cancelled or suspended, the proper officer may seek clarification or reasons for the same.

• The proper officer must issue notice in FORM GST REG-03 within:
  • 7 working days from the date of submission of the application in cases where the applicant has done authentication of Aadhaar number; and 
  • 30 days in cases specified in proviso to sub-rule (1) of rule 9 of CGST Rules, 2017. 

2.5 Action on Application of GST Registration

• In case of reply furnished by Applicant in Form GST REG-04:
  • The proper officer shall carefully examine the reply furnished by applicant in Form GST REG-04.
  • If the proper officer is satisfied with the reply, he may approve the registration within the prescribed time period. 
  • If the proper officer is not satisfied with the reply, he may reject the application in Form GST REG-05 mentioning reasons for rejection. 

• In case no reply is furnished by the applicant within prescribed time:
  • In such case, the proper officer may reject the application in form GST REG-05 mentioning the reasons for rejection.

2.6 Physical verification of Place of business

• In following cases, the proper officer shall carry out the Physical verification:
  • Where the Aadhar Authentication is not done;
  • Where the proper officer, based on the scrutiny of the application for registration and the uploaded documents, is of the opinion that physical verification of the place of business is essential 

• In case of physical verification, the concerned officer shall ensure that the physical verification report along with the other documents, including photographs, is uploaded on the system in FORM GST REG-30 within prescribed time limit.

• Till date, feature is available in ACES GST application to mark application for physical verification in case Aadhaar authenticated cases. However, in other cases, the concerned zones may devise a suitable mechanism at the local level so as to ensure that physical verification is conducted in a timely manner.

2.7 No Application to be Approved on Deemed Approval Basis

• The Proper officer shall ensure that any action against the application, either rejected or accepted or relevant query, is raised within the prescribed time limit.
• No registration should be granted on deemed basis. 
• In case of deemed approval, strict view may be taken where any gross negligence is observed on part of the concerned officer(s). 

2.8 Action in case of Deemed Approval and High Risk Cases

• In following cases, the CPC officer shall communicate the details of registration to concerned jurisdictional Commissionerate immediately after registration:
  • Where registration is granted on deemed approval basis; or 
  • Where registration is granted in case of High Risk cases without physical verification of the place of business.

• In such case, physical verification of the place of business shall be got conducted by the concerned Commissionerate within 15 days of such registration.

• Further, the concerned Commissionerate may get such physical verification of the place of business got conducted in other cases also, where ever required, based inter alia on various risk parameters and risk ratings as per tools available in ADVAIT/ BIFA or as per reports provided by DGARM, so as to verify authenticity of such registrations. 

Wherever the registered person is found to be non-existent, subsequent remedial action(s) may be taken without any delay. 

The Principal Chief Commissioner or Chief Commissioner may closely supervise the status of processing of the applications of registration, including physical verifications, within their zones.