Saket Patawari
Recently, the government, acting upon the suggestions of the GST Council, issued Notification No. 94/2020 – Central Tax, which notifies the Central Goods and Services Tax (Fourteenth Amendment) Rules, 2020. The GST registration-associated processes have been revised by means of this notification when providing in depth powers for cancellation/suspension of current registrations to the GST authorities. This, along with current news that the GST division has cancelled pretty much 1.63 lakh non-compliant and suspicious GST registrations in the previous 2 months, provides the impression that the Council has come out all guns blazing to fight the menace of fake GST registrations and the ensuing tax evasion by means of fraudulent GST invoices issued by such firms.
Let us have a appear at the summary of all critical amendments that have been introduced vide the aforesaid notification:
- A new sub-rule (4A) has been inserted in Rule 8 of CGST Rules 2017, which offers with GST registrations. This new sub-rule enables the GST authorities to gather Aadhaar biometric information from applicants or their authorized persons. Further, the authorities would also have the energy to get in touch with for the original version of the supporting documents uploaded on the GST portal at the time of application.
- The GST jurisdictional officer (the officer) has been offered powers to proceed with the cancellation of GSTIN exactly where a taxpayer avails Input Tax Credit (ITC) exceeding that which is permissible as per Section 16 of CGST Act [by inserting clause (e) in Rule 21 of CGST Rules 2017].
- Further, the officer has been empowered to proceed with the cancellation of registration exactly where the liability declared in GSTR 3B is much less than that declared in GSTR 1 in a certain month.
- Now, no chance of becoming heard shall be offered to a taxpayer for suspension of GSTIN, exactly where the correct officer (PO) has motives to think that the registration of individual is liable to be cancelled for contraventions pointed out in Rule 21. The phrase “opportunity of being heard” has been omitted from clause (2) of Rule 21A.
- Where there are considerable deviations/anomalies in specifics of an outward provide in GSTR 3B vis-a-vis GSTR1 or inward supplies (ITC) in GSTR 3B vis-a-vis GSTR 2B, which indicate contravention of the Act, the Department can now serve a notice in Type GST REG 31 searching for an explanation as to why the GSTIN must not be cancelled. The concerned taxpayer shall be essential to submit his reply inside 30 days of such notice becoming served to him.
- Where a GSTIN is suspended, no refund u/s 54 of CGST Act 2017 can be availed by the taxpayer. This signifies that initial, the GSTIN suspension proceedings should be closed just before applying for a refund.
Do ends justify the signifies?
As currently discussed above, these new amendments seem to grant in depth powers to GST authorities to gather information and cancel GST registrations if they think the taxpayers to be in contravention of specific provisions of the GST legislation. However, a query beckons – are such in depth powers essential to deal with the current menace? Has the GST Council missed a trick by granting disproportionate powers to tackle tax evasion? Let us analyze the very same.
Recently, the Aadhaar authentication function was introduced for expediting the course of action of GST registrations. As per this new function, the Indian Directors or authorized signatories have been essential to use their Aadhaar information to authenticate their GST registration application. If an application got authenticated working with this Aadhaar information, then the GST authorities have been essential to approve the stated application inside 3 days of receipt of all the valid information and facts. In case the applicant failed to authenticate the application working with Aadhaar, then GST authorities would be essential to conduct a field take a look at to the spot of company pointed out in the application and then grant the stated registration primarily based on the observations created through such take a look at.
Over and above this, owing to the current amendments, the GST authorities will now have the appropriate to gather Aadhaar biometric information as properly as have the appropriate to get in touch with for original copies of the supporting documents. However, a query arises as to how the authorities will gather such information and facts? Does the current infrastructure help such an endeavor? What would be the more burden that would be cast upon the applicant? Does it meet the ‘ease of doing business’ objective?
Another critical query that should be asked right here is why the government is reverting to authentication procedures that have been prevalent through the VAT regime. What more advantage is most likely to accrue by calling for original copies of the documents submitted when the very same can be accomplished by means of the powerful deployment of technologies (DSC authenticated documents to make sure their genuineness)? Such amendments seem to be very ironic, offered the government’s eagerness to move towards a regime of ‘faceless assessments.’
Further, consideration wants to be drawn to the amendment in Rule 21A(2). Rule 21 offers with the suspension of GST registration beneath particular situations like a company not commencing inside 6 months of getting GST registration or if a individual difficulties an invoice devoid of an underlying provide of goods or service (fake invoices). Rule 21A grants the energy to suspend the GST registration of a individual in case any of the motives pointed out in Rule 21 emerge in his case. The new amendment intends to eliminate the requirement of granting an chance of becoming heard just before suspending GST registration.
Keeping in thoughts the all round objective of curbing tax evasion by means of fly-by-evening firms, a single would wonder if such unfettered powers to the jurisdictional GST officer are commensurate with the objective sought to be accomplished. There ought to be some differentiation created amongst taxpayers who intentionally misuse the program and these who face genuine company hardships (sincere taxpayers), major to specific non-compliances.
On a single hand, the government has offered for prior consultation just before issuance of show-bring about notices in case of duty demands but on the other, appears to have offered a higher-hand to GST authorities to suo-moto cancel/suspend a GST registration devoid of adhering to the principles of organic justice.
Similarly, cancellation of GSTIN owing to – (1) a distinction in tax liability as reported in GSTR 1 and GSTR 3B (2) availing of ITC in contravention of Section 16 of CGST Act 2017 or (3) any considerable deviation amongst ITC availed in GSTR 3B as compared to that out there in GSTR 2B, could witness arbitrary invocation of powers.
Thus, it becomes crucial that the board comes out with specific clarifications and suggestions regarding the application of the aforesaid amendments to stay clear of a flurry of litigations as these would defeat a single of the most important purposes of ushering in GST viz. transparency in tax-associated matters and ease of carrying out company.
With good energy comes good duty!
The GST Council is certainly faced with the mammoth process of weeding out GST frauds and tax evasion, which have been rampant in the previous couple of years. However, the nature of amendments as discussed above does look to recommend an overkill on the government’s behalf to deal with this dilemma. The government appears to be justified in implementing technologies and information analytics to deal with this concern, but as has been the matter with previous initiatives, it is the technologies that has established to be the Achilles heel in implementing any large initiative. However, does this justify the grant of some arbitrary powers to the jurisdictional officers?
On a single hand, there is a possibility of curbing the hazard of fake registrations and invoices on the other hand, there exists an equal possibility of such powers building unintentional hurdles for the sector. Only time will inform if these powers have been exercised with good duty!
Saket Patawari is Executive Director – Indirect Tax, and Senior Director at Nexdigm (SKP). Views expressed are the author’s individual.