Registration Process in GST, Loopholes and Possible
Corrective Measures
Compliances to be made by Taxpayer:-
1) Applicant for new registration has to fill Form REG-01 (As per Rule 8 of the
CGST Rules, 2017):
• Part A of the REG-01 Form needs the following details to be filled by the
taxpayers:
The PAN is validated through the common portal maintained by CBDT. Also,
for verification, OTPs are sent to the mobile number and the e-mail address
declared in Part-A. Once these OTPs are verified by the applicant, a Temporary
Reference Number (TRN) is provided to the applicant for filling PART B of the
REG-01 form.
The TRN has to be quoted by the applicant for filling Part-B. Following the
TRN again OTPs will be sent to the mobile number and e-mail address of the
applicant. If the applicant doesn’t submit the application (Part-B) within 15
days, TRN and the entire information filled against that TRN will be purged
after 15 days.
In the Part-B of the form, there are ten tabs as Business Details, Promoter/
Partners, Authorized Signatory, Authorized Representative, Principal
Place of Business, Additional Places of Business, Goods and Services,
State Specific Information, Aadhaar Authentication and Verification, to
be filled by the applicant.
• On filing Part-B of the REG-01 there are two options available with the
applicant (As per Rule 4A of the CGST Rules, 2017):
a) To opt for Aadhar Authentication-
• Once an applicant opted “Yes” for Aadhaar authentication while registering on
the GST Portal and registration application is submitted, an authentication
link will be shared on mobile number & email (as given in registration
application on GST Portal), of Promotor/Partner, and Primary Authorized
Signatory which are selected upon submission of registration application. In
such a case, physical visit to the declared premises will not be mandatory.
b) To not opt for Aadhar Authentication-
• In such cases a physical visit to the declared premises will be mandatory.
Tasks to be performed by the GST Officers:
1) In case of Aadhar Authenticated Applications:
• The applications are allotted to the CPC officers. As soon as the application
for the registration is reflected in the Task List of the CPC officer, the officer
shall examine the details filled in registration application with the prescribed
documents listed in FORM GST REG-01. However, no clarification can be
sought for information furnished in Part-A of REG-01.
Checks to be ensured by the CPC Officer –
While examining the application, the CPC officer shall ensure that the
Applicant is not having an active GSTIN on same address
The CPC officer shall also check if the applicant is having an Inactive/
Cancelled GSTIN in same State and if so, the CPC Officer shall ascertain as to
whether the earlier registration was cancelled by the department suo moto or
on the request of the taxpayer.
It may also be verified as to whether the applicant has filed application for
revocation of cancellation of earlier registration. In case the CPC officer finds
that application for revocation of cancellation of registration has not been filed
and the reasons for which the earlier registration was cancelled suo motu by
the department are still in place, then the application is liable to be rejected.
Procedure Ahead-
If the particulars and documents furnished by the applicant are found in
order, approval for GST registration may be granted within a period of seven
working days.
If the particulars and documents furnished by the applicant are found to be
deficient either in terms of any information or any document required to be
furnished, or where the proper officer requires any clarification with regard to
any information provided in the application or documents furnished
therewith, he may issue a notice to the applicant Electronically in FORM GST
REG-03 within a period of seven working days from the date of submission of
the application. The applicant shall furnish such clarification, information or
documents electronically, in FORM GST REG-04, within a period of seven
working days from the date of the receipt of notice in FORM GST REG-03.
After receipt of clarification, information or documents electronically, in FORM
GST REG-04, the CPC Officer being satisfied shall approve the application for
registration or reject the application by recording the reasons of rejection and
inform the applicant electronically in FORM GST REG-05 within a period of
seven working days.
The failure to process the application within seven working days of submission
of application, will lead to deemed approval of the application.
In cases where the information/clarification has been sought by the CPC
officer and the applicant has submitted the information within the stipulated
period, the failure to process the application within seven working days of
receipt of clarification / information/ documents from the applicant, will lead
to deemed approval of the application.
1) In case applicant does not opt for Aadhar Authentication or Aadhar
authentication fails-
In such cases applications will be marked for mandatory physical verification
in the task list of the CPC officers. The ARNs marked for Physical Verification
are to be processed by CPC officer (after approval) within 30 days.
Deemed Approval will be granted if no action taken within 30 days of
submission of application submitted without AADHAAR authentication or no
action taken within 7 working days of submission of reply to the notice (FORM
GST REG-03) seeking additional information.
Since physical verification has to be done at the division level, thus
applications are forwarded by CPC officers to concerned divisions. The
Divisional Head delegates the applications to Range Officers based on the
Principal Place of Business who submit a report to the Divisional Head in
Form REG-30 after conducting the physical verification. This report is then
forwarded by the Divisional Head to CPC officers, who thereafter take a call
on approving or rejecting the registration application.
Loopholes in GST Registration:-
1) Many a times it is observed that Aadhar authenticated applications are
applied through dummy individuals. Though authentication is done, but that
person is found not be related to the business later on.
2) In the same manner applications have also been received on the basis of PAN
cards of dummy individuals not actually related to the businesses.
3) Forged rent agreements for verification of the premises uploaded on the
portal or shown to the officer conducting physical verification is also an issue.
Since the authenticity of the such agreements cannot be ascertained
completely by the portal or the verifying officers, it later becomes difficult to
nab offenders.
4) Applicants also apply for registrations from residential addresses. When an
applicant applies in the category of a service provider or a trader, the applicant
claims that an official premise is not required for conducting such a business.
While doing physical verification of traders it becomes even more difficult for
checking the veracity of their claims as any small room in any corner of the
city can be shown as the place of business for such persons. Authenticity of
such applicants is highly doubtful.
5) These days, many co-working spaces have also come up. In a single office,
many sub-offices will be opened up, with each office getting a private room of
its own. Many a times these are only dummy rooms, set up to meet the
conditions for obtaining GST registration and thereafter these are closed.
6) Similarly, there is a problem related to ‘virtual spaces’. There are offices
where on a single address several companies are registered. These offices
provide place to these companies when actually no set up or no member of
the companies exist there. The company gets registered at the address just for
the sake of it and pay minimal rents for the same. A guard will be sitting at
such offices and any communication received for a company registered at that
place will be delivered to the company by the guard. During physical
verification of such premises the officer doing the physical verification is not
able to find a proper office of these companies, but on calling the authorised
mobile number given in the registration application some person from the
company turns up and shows all the documents needed for verification as per
the rules. Granting registration to such virtual spaces often used for providing
services and doing trading is very risky. There are no specific guidelines to
deal with such cases. The notion of ‘work from home’ during the pandemic
has given rise to such arrangements in the field.
7) During physical verification certain documents need to be verified, and these
documents can be produced by any random person who turns up with these
documents on behalf of the company. Details of such persons are also to be
recorded in the REG-30 form by the verifying officers. But it would be better
if only the authorised signatory/representative or the proprietor be the one
producing such documents for verification.
8) There have been cases where dummy places of business have been setup
after applying for registration to meet the conditions of physical verification,
but once the verification is complete the entire dummy setup is wrapped up.
Once a PV is complete, there is no concept of regular follow up checks of the
same.
9) Applicants many times do not declare additional place of business and there
is no means for the visiting officer to know about any such additional place in
case it exists.
10) In the Part B of the REG-01 form the applicants are required to declare the
HSNs of Goods or services or both for which GST registration is being sought.
Many times, these are not properly declared or not declared at all. In such
cases it becomes difficult to verify the actual purpose of the business and co-
relate it with the space declared as the principal place of business. The
applicants can declare some HSN during verification and carry on with other
business once registration is granted.
11) With huge number of physical verifications to be performed and shortage
of staff, it is not practically possible to verify and check the authenticity of
several documents like electricity bills, rent agreements, ownership proofs,
ITRs, detail of employees, authorised representatives etc.
Possible Corrective Measures:-
1) Physical verification should be made mandatory and commensurate resources
should be provided to the divisional officers to perform the tasks related to
verification of registration applications.
2) Bank accounts and related KYC documents should be verified before granting
of registration.
3) Virtual spaces should not be allowed to be granted registration.
4) GST officers should be provided access to check the last-location of the person
operating the mobile number entered in the GST registration application.
5) The person producing documents for verification during a PV should be the
same person/persons on whose PAN registration is taken and, on whose
number, the Aadhar authentication link is sent.
6) Random PVs even after grant of registration should be taken periodically to
ensure that dummy setups do not become successful for getting registrations
for long.
7) There should be some mechanism to check the authenticity of rent
agreements.
