• Notification Date: 06-07-2023
• Notification No: N/A

CBIC to Tighten GST Regulation Norms using Geo-tagging, Biometrics

Following detection of about 12,500 fake entities, Goods and Services Tax (GST) authorities are looking to tighten registration norms with biometric authentication and geo-tagging of risky entities. Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri on Saturday said the return filing system will be tightened further to act against fraudsters who are misusing Permanent Account Number (PAN) and Aadhaar identification to obtain GST registration. 

“This special two-month drive which is going on now, is conducted jointly by states and us (Centre), and had identified 60,000 units as suspicious. Out of those, 50,000 verifications have already happened and we found that about 25 per cent (of 50,000) were bogus…so around 12,500,” Johri told reporters after the GST Day marking six years of the rollout of the indirect tax regime. 

GST authorities plan to introduce biometric authentication and geo-tagging for both existing and new registrants if they match as risky entities availing input tax credit fraudulently. Geo-tagging of all entities is being planned by the officers of the CBIC to authenticate that the address provided during GST registration is the place from where the entity operates, Johri said. 

A pilot on biometric authentication and geo-tagging is already underway in two-three states and depending on the results and evaluation of digital infrastructure requirement, the project would be launched across India, he said. 

“We are trying to see how we can tighten the system further…we have been using OTP-based authentication earlier. Now we are going to go in for biometric authentication also. Which would mean that in suspicious cases, persons will be asked to go to Aadhaar centre to have his biometrics verified,” Johri said. 

Tax authorities have identified certain locations where fake entities are rampant, such as Delhi, Haryana, Rajasthan. Certain parts of Gujarat, Noida, Kolkata and Assam and some parts in Telangana, Tamil Nadu and Maharashtra have registered cases of fake entities too with GST registration, he said. Sectors for which cases of fake entities are getting detected mainly include, metal or plastic scrap, and waste paper. “We are also finding that it is being generated for services. So, manpower services, advertising services have instances of fake billing,” Johri added. 

Concerns have been raised by some service sector companies, especially co-working spaces, as they do not typically fit in the brick-and-mortar rules for GST registration. “They have made some suggestions to us, we are still examining them. There are two areas where some feedback has come from the trade. One is that the service industry operates out of common work areas, not all business entities have a workplace of their own, so they work from such places…under GST law, and this is not unique to India, you have to have a definite place of business, it’s only then your records are kept there, your accounts are kept there, so any time the tax authorities want to audit you, they want to look at your accounts, there needs to be a brick and mortar structure. There is difficulty in agreeing what they want us to accept but it is under examination,” Johri said. 

Regarding controlling fake Input Tax Credit (ITC) claims, Johri said the tax authorities have tightened the system but there is still some latitude for taxpayer to edit how much ITC they will be able to claim in GSTR-2A. 

That is there because concerns were raised by trade the supplier doesn’t upload invoice on time and there are some invoices for which they have already made payment but they are not able to take credit because they are not uploaded. 

“We have allowed some editing facility. We will see how we can tighten that so that the scope for passing certain ITC is reduced,” Johri added.