APRIL 23, 2024

From Licence Raj to Registration Rage

By Vijay Kumar

CBIC, the Board – the ‘Central Board of Indirect Taxes and Customs', which is almost the Apex Authority for GST matters in the Country - has received references about difficulties being faced by applicants in getting a GST registration. The Board feels that "While on one hand, there is a need to prevent registration of fraudulent firms created for passing on input tax credit (ITC) without any underlying supply, on the other hand, there is a need to ensure that genuine applicants seeking registration are not unduly harassed."

Some of the important issues include, but are not limited to:

1. Clarifications being sought by the officers with respect to information submitted in the application FORM GST REG-01

2. Seeking of additional documents which are not prescribed in the List of Documents appended to FORM GST REG-01.

3. While processing the application, avoidable clarifications are being sought by the officers leading to delay in getting registration as well as rejection of applications.

Board's analysis reveals that these were mainly on account of -

1. Proof of principal place of business,

2. Constitution of business,

3. Identity details of authorized signatory, owner etc.

Board has now issued comprehensive instructions to take care of the latest developments and to provide clarity to the officers for processing of registration application. CBIC Instruction No. 03/2025-GST; Dated: April 17, 2025

Board reminds that an indicative list of documents has been prescribed in FORM GST REG-01 and wants the officers handling registration applications to go through the documents list and strictly adhere to the instructions in respect of processing of registration applications in the three categories mentioned above.

Documents in respect of Principal Place of Business: The statutory Form REG-01 has prescribed the documents required to be uploaded:

Now, Board clarifies:

It is to be noted that any one of the documents mentioned in the said list or any similar document such as water bill or any other document prescribed under the State or the local laws which clearly establishes the ownership of the premises submitted by the applicant should suffice. Any one document uploaded on the portal will be sufficient and no additional document should be requested from the applicant for proof of ownership of the premises of the applicant. While processing registration application, query should not be raised by the officer seeking original physical copy of these documents.

Board has observed that:

Additional documents of the lessor are being sought by the field formations such as his PAN card, Aadhar Card, photograph of the lessor in front of/or inside the property, etc. It is hereby advised that any one of the documents mentioned in the said list or similar documents such as water bill or any document prescribed under the State or the local laws which clearly establishes the ownership of the premises by the lessor should be sufficient proof of the principal place of business.

Apparently, some GST officers were playing detective, demanding the life story of your landlords, including their childhood photos and DNA samples. The Board has gently reminded them that they're registering a business, not conducting a background check for a spy movie. One ownership document for the landlord's property should suffice - unless they suspect your landlord is a figment of your imagination, conjured up to evade taxes.

Various unwarranted documents are being sought by raising presumptive queries. Some of the common queries raised are:

1. Residential address of the applicant/Managing Director/Authorized Signatory is not in the same city or the State where the registration has been sought;

2. HSN code of goods mentioned by the applicant in Registration application is banned or prohibited for sale in the State where the applicant wishes to conduct business;

3. The kind of activities mentioned in the registration application cannot be conducted from the particular premises etc.

Board instructs that Officers handling registration applications should not ask any presumptive query which is not related to the documents or information submitted by the applicant.

It's like they had a crystal ball that predicted your future tax evasion based on your pin code. The Board has politely asked them to stick to the documents, not their gut feelings.

Board has also issued instructions on processing of registration application.

1. Where applications have not been flagged as risky on the common portal based on data analysis and risk parameters, and the same are found to be complete and without any deficiency, the officers should approve the application within 07 working days of submission of application.

2. While processing the applications for registration, if any document apart from the listed documents is required to be sought, the officer shall seek the same only after the approval of the concerned Deputy/Assistant Commissioner.

3. Further, the officer shall also ensure that queries are not raised for minor deficiencies which are not relevant for establishing Proof of Place of Business or Constitution of Business etc.

It is difficult to understand why the Deputy/Assistant Commissioner should be concerned . Perhaps what they meant was the Deputy/Assistant Commissioner concerned. A ‘concerned Deputy Commissioner' is a worried Deputy Commissioner. How do you find out whether your Deputy Commissioner is worried or not? A Deputy Commissioner concerned is a relevant responsible Deputy Commissioner and a concerned Deputy Commissioner is a worried Deputy Commissioner!

Board has advised Chief Commissioners:

i. Closely supervise the status of processing of the applications of registration, including physical verifications, nature of queries being raised, deemed registrations etc., through periodic review within their Zones;

ii. Strict action may be taken against the officer deviating from these instructions ;

iii. Post sufficient staff for handling registration applications to ensure timely disposal of registration applications;

iv. Issue trade notices to address unique local systems to provide for acceptable documentary evidence to be submitted with the application.

While the Board deserves all praise for issuing these comprehensive instructions, it is surprising that such instructions have to be issued at all even seven years after GST came into existence. Board is aware that there are issues and is ready to find solutions by issuing instructions to follow the statutory requirements which the officers are any way required to follow. Following Borad instructions is not really a favourite pastime in the field and perhaps Board has to issue another Circular soon that disobeying these instructions will be viewed seriously.

Two months ago, in these columns, I reported a strange case where registration was refused because the applicant and his authorised representative did not belong to the State where registration was sought and the poor applicant had to approach the High Court to get a GST Registration. (NO GST Registration because you are from another State!)

Do the officers believe that granting registration is a favour to the taxpayer? Registration is not a favour; it's a statutory requirement – if at all there is any favour, it is a favour to the department, not the assessee. Are you not working against the government which pays you rather well by refusing registration and thereby taxes?

To start an enterprise, the trader has to organise several services and permissions like land, building, electricity, water, pollution and what will happen to him after all these, if he is told that he cannot run his business because he belongs to another State? And he has to approach the High Court to get a simple registration for the good and simple tax? The first step in this mega maze is registration and for that you have to go to the High Court! Is a High Court meant for trivialities like granting GST registration?

The Licence Raj seems to be still alive! In the early days, we used to have Central Excise Licence, Custom House Agents Licence, Gold Control Licence etc., Over the years the very word licence created a bad impression of permissions, controls, regulations, inspectors and the whole Raj in all its loathing glory. So, the licence raj gave way to the registration era; no, the raj remains – only the name licence has been changed to registration. What's in a name? That which you call a licence, called by any other name is equally stressful.

And Board feels that "there is a need to prevent registration of fraudulent firms created for passing on input tax credit (ITC) without any underlying supply…"

The whole gamut of investigation, fraud evasion etc., in GST seems to be revolving around input tax credit (ITC). If we plug that one loophole, we can all live happily with GST. Can't we evolve a system whereby credit is given only if GST is paid and if GST is paid, should we bother too much about underlying supply? Apparently, preventing fraudulent firms from leeching off the input tax credit (ITC) while simultaneously not unnecessarily tormenting genuine applicants is... tricky.