Physical Verification Likely to be Implemented by GST Council for High-Risk Category Cases

To prevent fraudulent registrations, the GST Council is considering reducing the time given to individuals for submitting their PAN-linked bank account information during the registration process. Currently set at 45 days, this duration may be reduced to 30 days.

In the upcoming council meeting on July 11th, a new provision is expected to be introduced. This provision will require mandatory physical verification of the business premises for applicants considered to be at high risk before granting them GST registration.

Moreover, there are expectations of changes to the GST Rules to explicitly state that the individual associated with the company premises undergoing physical verification should not be present at the location during the verification process.

The GST Council, headed by the Union finance minister, will review the proposed amendments put forth by the Law Committee. This committee consists of officials from the central government and the states, and the aim is to prevent fraudulent registrations under the Goods and Services Tax (GST) system.

Currently, a special initiative is underway led by central and state GST officers to identify fraudulent registrations. Surprisingly, around 17,000 GSTINs (GST Identification Numbers) were found to be non-existent during this drive. As a result, 11,015 GSTINs have been suspended, 4,972 have been canceled, and substantial tax evasion of Rs 15,000 crore has been detected.

In order to prevent unscrupulous individuals from obtaining fake or bogus GST registrations, it is advisable to strengthen the registration process under GST by revising the provisions of the Central GST Rules, as necessary. This will help in maintaining the integrity of the system and safeguard against such fraudulent activities.

As per the existing GST Rules, a registered individual is required to furnish details of a bank account linked to their PAN within 45 days of obtaining registration or before the due date of their returns, whichever comes earlier.

However, the Law Committee has proposed a revision, suggesting a reduced time frame of 30 days starting from the date of outward deliveries of goods or services in GSTR-1, or from the use of the invoice furnishing facility, whichever occurs first.

Furthermore, in the case of a proprietorship business, the PAN of the owner should be linked to their Aadhaar number as an additional requirement.

The Law Committee has proposed that in high-risk scenarios, registration should be granted within 30 days after application, subject to a physical inspection of the business premises.

The Committee identified potential risks associated with the requirement for the applicant's presence during the physical verification of the premises. It stated concerns about dishonest applicants making temporary arrangements ahead of the officer's visit and the possibility of unwarranted delays in cases where the applicant intentionally avoids being present.

To address these issues, the Committee suggested to the GST Council that the presence of the applicant at the business premises during verification should no longer be necessary.

The final decision on the Law Committee's recommendation will be made during the 50th GST Council meeting scheduled for Tuesday.

Also Read: ITAT Ruling: Deduction under Section 80P Inapplicable for Income Generated through Commercial Activity

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