The Goods and Services Tax (GST) administration has lifted a ban on deemed approval for new registrations, which was enforced during the lockdown period for fear of misuse of the facility in the absence of properly functioning GST departments throughout the country. During the lockdown, several states had reported the trend of newly registered companies engaging in circular trading.
A taxpayer has to file an application on the GST Network portal for registration as a GST business. This requirement is then assigned according to jurisdictions to either the federal or state tax officials. According to the rule, the official will process the request in three working days but if no action is taken, the same is considered accepted.
Last week, the GST policy wing issued instructions that all applications for registration which remained pending until July 15 as of June 30 should be deemed approval. It will also be considered accepted applications obtained after June 30 and pending until July 28.
The instruction also said few registration applications were accepted even during the lockdown when the facility was withdrawn due to technical deficiencies in GSTN. "GSTN was requested to forward to the Jurisdictional Officers certain GSTINs which were deemed accepted during the lockdown. In these cases, proper officers can get the physical verification of the premises done where necessary, "the letter said.
Many companies had seen long delays in getting their GST registration verified during the lockdown period, and found little support in raising the issues with authorities. Most of those complaints were in April and May for applications submitted.
A state tax official said that the commercial tax department of the state had found many circular trading cases – involving firms issuing fake invoices among themselves to fraudulently use input tax credit without actual supply of goods and services – with disproportionate participation from firms registered during the lockdown.
"During the pandemic era, tax authorities witnessed a sudden rise in GST registrations, even though other economic indicators such as e-way bills, tax collections, and GDP needed. Since the lockdown in virtually all states is over, the procedure for deemed approval of the registration application would be resumed from August 1, "said Rajat Mohan, senior partner at AMRG & Associates.