Fake invoices: GST Council’s law panel suggests online registration with live photo, biometrics

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November 22, 2020 9:01 PM

A source said businesses have to have some convincing income tax foot print available to establish their financial credibility to avail ITC based payment.

The borrowing scheme under a special window was operationalised on October 23 and the central government has so far borrowed Rs 30,000 crore in five instalments.The borrowing scheme under a special window was operationalised on October 23 and the central government has so far borrowed Rs 30,000 crore in five instalments.

Central and state tax officials have suggested the option of online GST registration with live photo and use of biometrics to weed out the menace of fake firms claiming input tax credit, sources said. The GST Council’s law committee, which comprises central and state tax officials, has also suggested that a fresh registrant must go for compulsory physical verification and personal identification in case opting for non-Aadhaar authentication based registration process and he or she does not have income-tax return supported adequate financial capability.

Finance ministry sources said the law committee has suggested that new or fresh registration in GST may adopt Aadhaar like registration process under which new registration can be done online with live photo and use of biometrics with due verification of documents.

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, a source said.

Those registrants who do not opt for Aadhaar authentication at the time of registration may have to submit recommendation letter by two taxpayers of adequate reliability, the source added.

Further, also, if on the basis of document supported credentials, a registrant/dealer falls in ‘trustworthy’ category then s/he can be given registration within seven working days.

If a registrant is not in the ’trustworthy’ category then conditional registration shall be given within 60 working days only after physical verification of the place of business wherein in such cases input tax credit to their buyers shall be allowed only after filing of their return and the dealer/s would be required to pay certain portion of their liability in cash instead of paying 100 per cent tax through ITC.

The committee, sources said, also suggested the dealer may also be required to deposit a portion of their due taxes through cash or via a bank guarantee of up to 2 per cent of their tax dues, instead of being allowed for 100 per cent tax payment through ITC.

A source said businesses have to have some convincing income tax foot print available to establish their financial credibility to avail ITC based payment.

The committee is of the view that to be categorised under ‘trustworthy’ category, a registrant/dealer must have good income tax credential, no previous cancellation of GST registration on same PAN for any violation of law and would need to undergo Aadhaar authentication as is required in case of an individual, proprietorship, partners, etc.

The committee also suggested suspension of first lot of riskier traders and identification of such taxpayers on the basis of significant criterion including non-filing of return for six months, sources said. There are about 6 lakh dormant registrants in GST.

There were about 35,000 dealers who were given registration in 2018-19 and 2019-20, having GST liability of more than Rs 50 lakh (yearly), but more than 99 per cent tax paid through ITC and have no credential in income tax (did not pay income tax even of Rs 1 lakh in last three years), sources said.

Sources said that in the law committee’s opinion, once a dealer is suspended, he has to explain the discrepancy within the prescribed time limit for revocation of suspension.

Also, measures shall be taken to build a full system-based workflow for suspension of risky dealers besides system integrated income tax credential verification and bank data verification for credibility of taxpayer, cross verification of documents submitted, etc, sources added.

Sources said that the law committee has suggested two-pronged strategy—one, for the fresh or new registration applicants and other for weeding out of existing fake dealers from the systems.

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

The GST investigation arm DGGI and Central GST Commissionerates have so far arrested 48 persons including one woman and three chartered accountants and have booked 648 cases besides identifying 2,385 entities.

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