Background
- In the National Co-ordination Meeting on 24th April 2023, it was discussed that while various system based and policy measures are being taken to address fake registration and fake input tax credit problem, there is a need of concerted and coordinated action on a mission mode by Central and State tax authorities to tackle this menace in a more systematic manner.
- It was agreed that a nation-wide effort in the form of a Special Drive should be launched on All-India basis to detect such suspicious / fake registrations and to conduct requisite verification for timely remedial action to prevent any further revenue loss to the Government.
Period of Special Drive
A Special All-India Drive may be launched by all Central and State Tax administrations during the period 16th May 2023 to 15th July 2023.
Identification of fraudulent GSTINs & Information Sharing Mechanism
- Based on detailed data analytics and risk parameters, GSTN will identify such fraudulent GSTINs for State and Central Tax authorities.
- GSTN will share the details of such identified suspicious GSTINs, jurisdiction wise, with the concerned State/ Central Tax administration (through DGARM in case of Central Tax authorities) for initiating verification drive and conducting necessary action subsequently.
- A nodal officer will be appointed by each of the Zonal CGST and SGST Zone and the Nodal officer of the State/ CGST Zone will ensure that the data received from GSTN/ DGARM/ other tax administrations is made available to the concerned jurisdictional formation within two days positively.
Action to be taken by field formations on identification of suspicious GSTINs / Consequences of being identified as Suspicious GSTINs
- If, after detailed verification, it is found that the taxpayer is non-existent and fictitious, then the tax officer may immediately initiate action for suspension and cancellation of the registration of the said taxpayer in accordance with the provisions of section 29 of CGST / SGST Act, read with the rules thereof.
- Further, the matter may also be examined for blocking of input tax credit in Electronic Credit Ledger as per the provisions of Rule 86A of CGST / SGST Rules without any delay.
- Additionally, the details of the recipients to whom the ITC has been passed by such non-existing taxpayer may be identified through the details furnished in FORM GSTR-1 by the said taxpayer.
- Where the recipient GSTIN as mentioned in GSTR 1 pertains to the jurisdiction of the said tax authority itself, suitable action may be initiated for demand and recovery of the input tax credit wrongly availed by such recipient on the basis of invoice issued by the said non-existing supplier, without underlying supply of goods or services or both.
- In cases, where the recipient GSTIN pertains to a different tax jurisdiction, the details of the case along with the relevant documents/ evidences, may be sent to the concerned tax authority, as early as possible.
- Action may also be taken to identify the masterminds/ beneficiaries behind such fake GSTIN for further action, where ever required.
- Recovery of Government dues and/ or provisional attachment of property/ bank accounts, etc. as per provisions of section 83 of CGST / SGST Act
Care to be taken by taxpayers / Registered person
It would have been good if instructions also contains the primary details that field officers will verify during field visit so that taxpayers can keep the same ready. Further, it will also bring more clarity on the details to be verified and will not result into calling for non relevant information which the taxpayers are now facing during the course of obtaining registration.
As the instructions do not refer to such things, we tried to compile the basic things that one should take care at the time of field visit.
- Rule 18(1) of the CGST/SGST Rules- This rule requires all registered taxpayers to display their registration certificate at a prominent location at their principal place of business along with every additional place of business.
- Rule 18(2) of the CGST/SGST Rules- This Rule requires all registered taxpayers to display their GSTIN on its name board at its principal place of business along with every additional place of business.
- Make sure that apart from Principal place of business, all additional place of businesses are registered with GST from where taxable goods are stored, supplied, warehoused etc.
- Keep KYC documents of Proprietor, one of the director / partner and authorized person ready for verification along with presence of any of them to the best extent possible.
- Keep the business address related documents (principal, additional as the case may be) ready for verification including copy of latest electricity bill, tax bill, index 2, NOC / Rent agreement if not owned.)
- Make sure that if multiple businesses are registered on the same premise the proper demarcation etc. is done to identify the area, stock etc.
As the special drive focuses on verification of existence of persons who obtained registration and existence of business place, the above details seems to be sufficient.
However, additionally, the following details may be kept regularly updated as a better precaution.
- Make sure that the physical stock matches with the books stock (This is anyways mandatorily required as per Section 35 – Maintenance of accounts and records). Highlighting herewith only for the clarification that there is no delay in accounting resulting into the deferment of physical and book stock.
We tried to prepare this summary in a practical manner as much as possible and hope you will find it worth reading.