Physical Verification in GST Registration: An In-depth Analysis

Introduction

The Goods and Services Tax (GST) registration process in India has seen a significant shift recently. Despite the Aadhaar authentication being carried out, there has been an increase in the number of cases where physical verification is being conducted. This article aims to provide a comprehensive understanding of this trend, with a focus on the relevant parts of GST Rules 8, 9 and 25.

Aadhaar Authentication in GST Registration

Aadhaar authentication is a process where the Aadhaar number, along with other biometric details of the Aadhaar holder, are submitted to the Central Identities Data Repository (CIDR) for verifying the user for his desired action. The main purpose behind the Aadhaar authentication is to create an online platform wherein the identity of Aadhaar holders can be validated anytime anywhere. This helps to keep a check on the malpractices happening under the Goods and Services Tax law.

Recent advisory on GSTIN common Portal w.r.t. Physical Verification despite Aadhaar Authentication-

“Dear Taxpayers,

In accordance with Rule 9 of the Central Goods and Services Tax (CGST) Rules, 2017, pertaining to the verification and approval of registration applications, following is informed:

Where a person has undergone Aadhaar authentication as per sub-rule (4A) of rule 8 but has been identified in terms of Rule 9(aa) by the Common portal for detailed verification based on risk profile, your application for registration would be processed within thirty days of application submission.

Necessary changes would also be made to reflect the same in the online tracking module vis-à-vis processing of registration application.

Thank you for attention.”

Now let’s discuss what different rules have to say with regards to physical verification and Aadhaar authentication.

GST Rule 8: Application of Registration-

(4A) Where an applicant, other than a person notified under sub-section (6D) of section 25, opts for authentication of Aadhaar number, he shall, while submitting the application under sub-rule (4), undergo authentication of Aadhaar number and the date of submission of the application in such cases shall be the date of authentication of the Aadhaar number, or fifteen days from the submission of the application in Part B of FORM GST REG-01 under sub-rule (4), whichever is earlier:

Provided that every application made under sub-rule (4) by a person, other than a person notified under sub-section (6D) of section 25, who has opted for authentication of Aadhaar number and is identified on the Common portal, based on data analysis and risk parameters, shall be followed by biometric-based Aadhaar authentication and taking photograph of the applicant where the applicant is an individual or of such individuals in relation to the applicant as notified under sub-section (6C) of section 25 where the applicant is not an individual, along with the verification of the original copy of the documents uploaded with the application in FORM GST REG-01 at one of the Facilitation Centres notified by the Commissioner for the purpose of this sub-rule and the application shall be deemed to be complete only after completion of the process laid down under this proviso.

(4B) The Central Government may, on the recommendations of the Council, by notification specify the States or Union territories wherein the proviso to sub-rule (4A) shall not apply.

(5) On receipt of an application under sub-rule (4) or sub-rule (4A), an acknowledgement shall be issued electronically to the applicant in FORM GST REG-02.

GST Rule 9: Verification of the application and approval

“8(1) The application shall be forwarded to the Proper officer who shall examine the application and the accompanying documents and if the same are found to be in order, approve the grant of registration to the applicant within a period of seven working days from the date of submission of the application.

Provided that where-

(a) a person, other than a person notified under sub-section (6D) of section 25, fails to undergo authentication of Aadhaar number as specified in sub-rule (4A) of rule 8 or does not opt for authentication of Aadhaar number; or

(aa) a person, who has undergone authentication of Aadhaar number as specified in sub-rule (4A) of rule 8, is identified on the Common portal, based on data analysis and risk parameters, for carrying out physical verification of places of business; or

(b) the Proper officer, with the approval of an officer authorised by the Commissioner not below the rank of Assistant Commissioner, deems it fit to carry out physical verification of places of business,

the registration shall be granted within thirty days of submission of application, after physical verification of the Place of business in the presence of the said person, in the manner provided under rule 25 and verification of such documents as the Proper officer may deem fit.

Rule 9 makes it ample clear that even if the person has opted for and has undergone Aadhaar authentication his registration could be selected for physical verification. Further in the Rule it has been specified that the proffer officer is expected to either approve or send a notice requiring rectification of defects in Form REG-03 within a period of Seven Days. However, in cases covered by the above proviso the period for issuing such notice or approving the registration shall be 30 days rather than the period of seven days which is applicable to cases not covered by the above proviso.

GST Rule 25: Physical Verification of Business Premises

According to Rule 25 of the CGST Rules, 2017, the Proper officer may conduct physical verification of the place of business of a person due to failure of Aadhaar authentication or due to not opting for Aadhaar authentication before the grant of registration. The verification report, along with other documents, including photographs, shall be uploaded in FORM GST REG-30 on the Common portal within a period of fifteen working days following the date of such verification.

Conclusion

The recent trend of conducting physical verification for GST registration, even in cases where Aadhaar authentication has been carried out, can be attributed to the provisions of the CGST Rules. While Aadhaar authentication provides an initial layer of verification, the physical verification mandated by Rule 25 offers an additional layer of security to prevent fraudulent practices. This ensures the integrity of the GST registration process and aids in the effective implementation of the GST regime in India.