Gujarat State Finance Minister Announces Stricter Rules for GST Registration with Mandatory Police Verification

Gujarat State Finance Minister Announces Stricter Rules for GST Registration - Mandatory Police Verification - TAXSCAN

The Gujarat State Finance Minister Kanubhai Desai has announced strengthening the rules for the Goods and Services Tax (GST) registration due to an increase in the individuals engaged in fake billing for claiming Input Tax Credit (ITC)  claims.

The Finance Minister mentioned that the GST registration will have a mandatory police verification as followed in the Passport verification mechanism before the House on the first day of the Monsoon Session.

The government has chosen to introduce a mechanism in the Goods and Services Tax (GST) registration process that bears similarities to the procedure followed for obtaining a passport. This mechanism includes a mandatory step of police verification for applicants. The primary aim behind this decision is to address the rising issue of fraudulent invoicing within the GST system.

Read More: 8000 Fake GST ITC Claim Cases: DGGI to send Notices to Entities

Under this system, individuals or businesses seeking GST registration will be subjected to a thorough background check by local law enforcement agencies. The police verification process will involve scrutinizing the applicant’s credentials and assessing their suitability for GST registration. This step is crucial in verifying the authenticity of the information provided by applicants and ensuring that those who obtain GST registration are legitimate entities.

The need for such a mechanism has arisen due to the growing concern over individuals and businesses engaging in fraudulent practices, such as creating fake invoices to wrongfully claim ITC. These fraudulent activities not only lead to revenue losses for the government but also disrupt the integrity of the GST system.

By incorporating police verification into the GST registration process, the government aims to create a more robust and secure system that can effectively identify and deter fraudulent activities. However, the same may lead to more complications in getting registration and will affect the individuals who want to do business genuinely.

Also read: Central Govt to Set Up DGGI Offices Cell to Monitor Websites and Portals Running without Paying Tax: GST Council

The minister conveyed to the legislative body that ‘The Gujarat Taxation Laws (Amendment) Bill, 2023’ would establish an upper limit for the interest rate and grant the government the authority to declare a reduced interest rate through an official notification.

Recently, the  Directorate General of GST Intelligence (DGGI) arrested the mastermind of the fake invoicing racket. The bogus invoices were generated, and the ITC was claimed. The racket has taken advantage of the government in this way. The papers and evidence show that the racket generated fraudulent invoices totaling more than Rs. 97 crores, and that only four of the enterprises implicated in the racket were able to claim fake ITC totaling more than Rs. 13 crores.

Read More: DGGI arrests Mastermind of Invoice Racket issuing fake invoices worth Rs.97.8 cr with bogus ITC worth Rs. 13 cr

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