Guidelines for the All-India Drive Against Fake GST Registrations

Guidelines for Special All-India Drive Against Fake GST Registrations

Introduction

This blog focuses on the guidelines established for the Special All-India Drive aimed at identifying and addressing fake GST registrations, scheduled from May 16 to July 15, 2023. This initiative outlines processes for recognizing suspicious GSTINs, the implications for non-existent taxpayers, and recommended precautions for legitimate taxpayers. Additionally, it examines the verification protocols employed by field officers during their compliance checks.

Background

During the National Coordination Meeting on April 24, 2023, it was noted that although various system-based and policy measures have been implemented to address the issues of fake registrations and fraudulent input tax credits, a unified action plan by Central and State tax authorities is necessary. The consensus was to launch a nationwide drive to systematically uncover suspicious or fraudulent registrations, enabling timely verification and remedial actions to mitigate potential revenue loss for the government.

Period of the Special Drive

The Special All-India Drive against fraudulent GST registrations will occur from May 16, 2023, through July 15, 2023, under the coordination of both Central and State Tax administrations.

Identification of Fraudulent GSTINs and Information Sharing Mechanism

GSTN will utilize detailed data analytics and risk assessment parameters to identify fraudulent GSTINs. The findings will be shared with relevant State and Central tax authorities, facilitated by the Directorate General of Anti-Profiteering Matters (DGARM) for Central Taxes. Each Zonal CGST and SGST Zone will appoint a nodal officer responsible for ensuring that the data received from GSTN or DGARM is disseminated to the appropriate jurisdictional units within two days.

Required Actions on Suspicious GSTINs

Upon the identification of a suspicious GSTIN, if the subsequent verification confirms that the taxpayer is non-existent or fictitious, the tax officer may initiate actions for the suspension and cancellation of the registration in accordance with the provisions outlined in Section 29 of the CGST/SGST Acts, as well as the rules associated with them.

Furthermore, pursuant to Rule 86A of the CGST/SGST Rules, further examination may reveal the need to block input tax credit in the Electronic Credit Ledger. Officers will also identify recipients who received ITC from such non-existent taxpayers by analyzing the supplied data from FORM GSTR-1.

If the recipient GSTIN corresponds with the jurisdiction of the concerned tax authority, actions for recovery of input tax credit wrongly availed may be implemented based on the invoices issued by the non-existent supplier.
In cases where the recipient GSTIN falls under a different jurisdiction, relevant documentation must be sent promptly to the appropriate tax authority.
Identifying masterminds or beneficiaries behind fraudulent GSTINs for necessary action may also be undertaken.

Precautions for Taxpayers and Registered Persons

To aid compliance and minimize complications during field visits by tax officers, it is advisable for registered persons to be aware of what documents may need to be presented. The following requirements have been compiled based on existing rules:

Rule 18(1) of CGST/SGST Rules: Taxpayers must display their registration certificate prominently at their principal business location and each additional place.
Rule 18(2) of CGST/SGST Rules: The GSTIN should be showcased on the name board at both the principal and additional business premises.
Ensure all additional business locations where taxable goods are stored or supplied are registered under GST.
Maintain KYC documents for the proprietor, one director or partner, and an authorized person ready for verification, ensuring their presence is feasible.
Keep all business-related documents (e.g., electricity bill, tax bill, NOC, rent agreements) prepared for verification.
Properly delineate multiple registered businesses on the same premises to facilitate identification of respective areas and stock.

Maintaining Compliance

In light of the focus on verifying the existence of registered individuals and business premises during this drive, the aforementioned details should suffice. However, it is also recommended that taxpayers regularly update the following details:

Ensure physical stock corresponds with recorded stock, as required by Section 35 concerning the maintenance of accounts and records. This helps prevent discrepancies that delay accounting and compliance.