Fake invoice issue: GST Council law panel urges Aadhaar-like registration

Fake invoice issue: GST Council law panel urges Aadhaar-like registration

The law committee of the Goods and Services Tax (GST) Council has recommended tightening the registration process to weed out those issuing fake invoices, informed sources.

After its two-day deliberations, the committee suggested introducing an Aadhaar-like registration process for new applicants under the GST regime. Under this, a new registration can be done online with live photo and use of biometrics after document verification, said sources in the Department of Revenue (DoR).

Such facilities can be provided at banks, post offices, and GST seva kendras (GSKs). The GSKs can work along the lines of passport seva kendras insofar as to provide new registration facilities with the mandatory checks on fake registration.

According to DoR sources, the committee suggested that a new registrant must opt for compulsory physical verification and personal identification in case he opts for non-Aadhaar authentication-based registration and does not have the income-tax (I-T) return supporting his adequate financial capability. In such a case, he may have to furnish a recommendation letter by two taxpayers of adequate reliability.

The speed of the registration process will depend on the trustworthiness of the applicant. According to sources, the committee was of the view that to be categorised ‘trustworthy’, a registrant or a dealer must have the I-T credential and no previous cancellation of GST registration on the same permanent account number for any violation of law.

Such trustworthy applicants can be given registration within seven working days.

If applicants are not in the trustworthy category, a conditional registration will be given within 60 working days only after physical verification of the place of business. In such cases, the input tax credit to their buyers will be allowed only after filing of tax returns.

The committee also recommended that dealers may also be required to deposit a certain portion of their taxes through cash or via bank guarantee up to 2 per cent of their tax dues. Currently, they pay all taxes through the input tax credit. They should have convincing I-T footprint available to establish financial credibility to avail of an input tax credit-based payment.

For example, a dealer with a Rs 100-crore business needs to pay on average a tax of Rs 18 crore. He may then be required to pay a sum of Rs 3.6 lakh via bank guarantee.

These conditions can be relaxed or waived by jurisdictional officers, depending on verification, the committee suggested.

Also, those who appear riskier will be required to undergo in-person verification at the GSKs.

The committee proposed a full application of the business intelligence and fraud analytics tool for precise identification of riskier dealers, based on the riskier input supply chain and outward supply chain, and abnormal taxpayer behaviour in terms of input tax credit availment, etc.

It suggested suspension of the first lot of riskier traders and identification of such taxpayers on the basis of significant criteria, including non-filing of tax return for six months, added sources.

The committee underlined there are 600,000 dormant registrants. Of those given registration in 2018-19 and 2019-20, 35,000 dealers had a GST liability of more than Rs 5 lakh yearly and they paid more than 99 per cent of their tax through input tax credit. They did not pay I-T of even Rs 1 lakh lakh in the past three years.

The committee also suggested discussing these measures with states and other stakeholders before placing them formally before the for further action.

Sources said the committee’s suggestions would tackle the menace of fake invoices, ineligible availment, and passing on of input tax credit by fraudsters. Moreover, they would also ensure the ease of doing business provided under the GST system is not impeded.

The authorities have launched a clampdown on those issuing fake invoices. In 10 days of the drive, the directorate-general of GST intelligence and central GST commissionerates have arrested 48 people and booked 648 cases against 2,385 entities.

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