• Notification Date: 05-06-2023
• Notification No: N/A

GST Drive: Micro & Small may face Unfair Licence Cancellation amid Physical Visits

Micro and small businesses fear unfair suspension or cancellation of goods and service tax (GST) registration amidst growing physical visits by GST officials. 

While GST officials are visiting premises physically to verify addresses and to detect fraudulent activities, the industry body for small businesses feels that the licence raj may return. 

The special drive, which is part of the two-month nationwide drive launched by central and state GST departments, started on May 16 and is expected to continue till July 15. This drive is to detect fake GST registrations, fake billers and so on. 

Vinod Kumar, President, India SME Forum (ISF) and President of Forum for Internet Retailers, Sellers, and Traders (FIRST), told CNBC-TV18, “Over 700 businesses have contacted us in the last three-four days, fearing suspension and cancellation of GST registration over issues like use of co-working space or shared warehousing.” 

Such a physical drive, Kumar pointed out, makes the six-year effort to make the taxation process faceless redundant. 

The body is holding consultations with state and central GST officials. This is to bring forth the concern of small and micro businesses due to such drive. 

Vinod Nair, President of  Federation of Madras Merchants and Manufacturers Association said, “Instead of helping bring down compliance and compliance costs, the visit by GST officers is going to make things worse. All these costs will weigh on the end customers.” 

"The officials have a target to achieve and to achieve that they decided to launch this drive,” someone familiar with the matter alleged. 

Shailesh Patwari, President of Gujarat Chamber of Commerce and Industry, said, “There are some existing hiccups that have to be resolved. Instead of working towards resolving those issues, the visits will just complicate things further.” 

Patwari added that even if there is one fake seller in a genuine supply chain, GST officials penalise all the sellers. “Such bottlenecks need to be addressed.” 

Unlike in the past, the GST officers are empowered to not just make visits to verify GST-related details, but also cancel licences. 

Sources say these physical visits have been on for some time, and led to many small and micro businesses losing their licences even though they have followed the regulations. “Once registration gets cancelled, the process to get it back or get a new number is not a simple task,” Kumar added. 

Commenting about reports on GST officials unearthing 10,000 bogus GST registrations, Kumar said, “Of them, 20 percent may have followed the books yet ended in this situation. Most of these small businesses that have landed in this position, may not have the wherewithal (like tax consultants) to respond to GST authorities. (Even) if they have not done anything wrong, they still suffer.” 

With growing awareness around coworking and shared warehousing, more and more businesses have opted to use such shared space as an address for GST registration. “There is no such norm on not putting shared space as an address for GST registration. So, many businesses to reduce cost have opted for shared space,” Kumar added. 

Various associations of small and micro businesses echo a similar sentiment on the need for an application, where businesses can enter their activity details, thus bringing down costs. 

The industry body felt that the drive will push more and more small businesses to remain small or some businesses may even opt for multiple companies to avoid falling under the GST ambit. Nair added, “Compliance cost has to be reduced if you want small and micro businesses to join the GST ambit.” 

Lower compliance costs and less paper or administrative work will encourage more businesses to register. Most of the small businesses have to offer the same details to GST, I-T and other entities. Kumar asserted that this duplication of paperwork should also stop.