The Law Committee of the Goods and Services Tax (GST) Council has recommended to tighten the registration process to inform the issuers of fake invoices.
After its two-day deliberations, the committee suggested starting the Aadhaar-like registration process for new applicants under the GST regime. Under this, sources in the Department of Revenue Verification (DOR) said that a new registration with live photos and use of biometrics can be done online after document verification.
Such facilities can be provided at banks, post offices and GST service centers (GSK). GSK can operate on the lines of Passport Seva Kendras to provide new registration facilities with mandatory checks for fake registration.
According to DoR sources, the committee suggested that a new registrar must opt for mandatory physical verification and personal identification if it opposes non-Aadhaar authentication-based registration and has sufficient financial capacity to support There is no income tax (IT) return. In such a case, he may have to submit a recommendation letter by two taxpayers of sufficient credibility.
The speed of the registration process will depend on the credibility of the applicant. According to sources, the committee was of the view that in order to classify ‘trustworthy’, a registrar or dealer must have IT credentials on the same permanent account number and no previous cancellation for violation of law.
Such trusted applicants can be given registration within seven working days.
If applicants are not in the trustworthy category, a conditional registration will be granted within 60 working days only after physical verification of the place of business. In such cases, input tax credit will be allowed to their buyers only after filing tax return.
The committee also recommended that dealers may be required to deposit up to 2 percent of their tax through cash or bank guarantees. Currently, they pay all taxes through input tax credit. They need to be confident about the available IT footprints to establish financial credibility to avail input tax credit-based payments.
For example, a dealer with a business of Rs 100 crore will have to pay an average tax of Rs 18 crore. Then he may be required to pay Rs 3.6 lakh through a bank guarantee.
These conditions can be relaxed or waived by judicial authorities, based on verification, the committee suggested.
In addition, those who appear risky will have to undergo in-person verification at GSK.
The committee proposed a complete application of business intelligence and fraud analytics tools for accurate identification of risky dealers based on risky input supply chains and outward supply chains, and unusual taxpayers in terms of input tax credit benefits, etc. Behavior.
Sources said the first lot of suspension of at-risk traders and identification of such taxpayers has been done on the basis of important criteria, including not filing tax returns for six months.
The committee underlined that there are 600,000 inactive registrars. Of the registrations granted in 2018-19 and 2019-20, 35,000 dealers had a GST liability of over Rs 5 lakh annually and paid more than 99 per cent of their tax through input tax credit. He did not make an IT payment of Rs 1 lakh lakh in the last three years.
The committee suggested discussing these measures with states and other stakeholders, so that they could be formally placed before the GST Council for further action.
Sources said that the committee’s suggestions would be able to deal with the threat of fake invoices, ineligible benefits and fraudsters passing input tax credits. Apart from this, they will also ensure that the business provided under the GST system is easy to carry out.
Authorities have clamped down on issuing fake invoices. In 10 days of the drive, the Directorate General of GST Intelligence and the Central GST Commissioners have arrested 48 people and registered 648 cases against 2,385 entities.