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Non filing of GST returns for six months could cost a business its GST registration. Photo: Indranil Bhoumik/Mint
Non filing of GST returns for six months could cost a business its GST registration. Photo: Indranil Bhoumik/Mint

GST panel proposes overhaul of registration process to check tax evasion

The recommendations include use of Aadhaar or Aadhaar like biometric identification for new registrations, steps to identify businesses that pose risk of revenue loss to the exchequer

New Delhi: A panel of officials attached to the federal tax body, the Goods and Services Tax (GST) Council, has proposed overhauling the GST registration process and suspending the registration of businesses identified as ‘risky.’

The proposals by the law committee of the GST Council, a team of central and state officials advising its ministerial members, aim at tightening of compliance measures and to target restrictions on select firms identified as risky without affecting the ease of doing business in general, said a finance ministry official.

The recommendations include use of Aadhaar or Aadhaar like biometric identification for new registrations, steps to identify businesses that pose risk of revenue loss to the exchequer, use of income tax return to verify credentials of the entrepreneur seeking GST registration and restriction on using tax credits from purchase of raw materials to meet the final tax liability.

Also, non filing of GST returns for six months could cost a business its GST registration. At the moment there are six lakh dormant GST-registered firms among the 1.2 crore entities with GST registration.

Also, GST registration seekers would be profiled based on their credentials and classified into ‘trust worthy’ and the others. Trustworthy entrepreneurs are those who have a credible income tax payment history and have their identity authenticated by Aadhaar and have no history of having GST registration cancelled. They will get GST registration within a week, while the others will be given within two months after physical verification of business premises, said the official. Those that are not trust worthy may also be asked to pay a part of their tax liability in cash instead of adjusting it fully against the tax credit available to them.

The proposals put together by the law committee at a meeting last week will be further discussed before placing before the Council, the official said, requesting anonymity.

The move signals a major tightening of the three-year old indirect tax system leveraging GST’s ability to track the entire supply chain using the system of input tax credits. As GST return filing system becomes more automated with the use of e-invoices and auto-filled tax returns, discrepancies in compliance will get flagged in the system.

GST authorities have been on a nation-wide compliance enforcement drive this month which led to busting a fake invoice racket. That has led to arrest of 48 persons and three Chartered Accountants and 648 cases registered so far this month.

The government is now armed better to enforce greater compliance with deep digital capabilities for automatically detecting evasion, leakages, defaults and delays, according to Rishi Agrawal, Co-founder and chief executive officer of Avantis Regtech Pvt. Ltd, a regulatory technology firm. “Sooner than later, India Inc. will need to focus on accurate and timely compliance. Ignorance of the law will not be an excuse for non-compliance," said Agrawal.

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