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

The law committee of the GST Council has recommended tightening the registration process to weed out those issuing fake invoices, sources said.

After meeting for two days, the Committee suggested introducing an Aadhaar-like registration process for new applicants under the goods and services tax (GST) regime. Under this, a new registration can be done online with live photo and use of biometrics with verification of documents, sources in the department of revenue (DoR) said.

Such facilities can be provided at banks, post offices, and GST Seva Kendras (GSKs). The GSKs can work on the pattern of Passport Seva Kendras to provide new registration facilities with required checks on fake registration.

According to DoR sources, the committee, comprising officers, suggested that a fresh registrant must go for compulsory physical verification and personal identification in case he opts for non-Aadhaar authentication-based registration process and does not have income-tax return supporting adequate financial capability. In such a case, he may have to submit a recommendation letter by two taxpayers of adequate reliability.

The speed of the registration process will depend on trustworthiness of the applicant. According to sources, the committee was of the view that to be categorised under ‘trustworthy’ category, a registrant or a dealer must have good income tax credential, no previous cancellation of GST registration on the same PAN for any violation of law.

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

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

The committee also recommended that the dealer may also be required to deposit a certain portion of their taxes through cash or through bank guarantee up to two per cent of their tax dues.

Currently, they can pay all the taxes through ITC.

They have to have some convincing income tax footprint available to establish their financial credibility to avail ITC based payment. For example, a dealer of Rs 100 crore business needs to pay on an average a tax of Rs 18 crore, then he may be required to pay a sum of Rs 3,60,000 through bank guarantee.

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

Also, those who appear riskier will be required to undergo in-person verification at GST Seva Kendras.

The committee proposed a full application of Business Intelligence and Fraud Analytics (BIFA) tool for precise identification of riskier dealers based on the riskier input supply chain and outward supply chain, abnormal taxpayer behaviour in terms of ITC availment etc.

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

The committee underlined that there are about 600,000 dormant registrants in GST. Besides, out of those given registration 2018 -19 and 2019-20, about 35,000 dealers had GST liability of more than 500,000 yearly and they paid more than 99 per cent of tax through ITC. They did not pay income tax of even Rs one lakh in the last three years.

The committee also suggested discussing these measures with the states and other stakeholders before putting it formally to the GST Council for further necessary action.

Sources said the committee’s suggestions would tackle the menace of fake invoices and ineligible availment and passing on of ITC by unscrupulous fraudsters and on the other would ensure not to impact the ease of doing business provided by the GST system.

The GST authorities…