A new mechanism under GST may facilitate granting new registration within 3 working days to new and small businesses. The concept note for new mechanism has got ‘in-principle’ approval from the GST Council in its meeting on December 21.

“The proposed mechanism aims to serve two purposes. First, it ends to address the complaint about unnecessary queries by tax officials and denial of registration on flimsy grounds. Second, it aims to curb exploitation of present registration process by unscrupulous persons by using fabricated or fake identities to obtain multiple registration in order to pass on fraudulent ITC,” an official said while explaining the intention.

Another official said that based on data in respect of applications filed for new registration, it was found that nearly 98 per cent of the applicants either do not pass on ITC or pass on within the limit of ₹5 lakh per month. “If the proposed framework of registration is implemented with a threshold limit of ITC of ₹5 lakh per month, more than 98 per cent of the applications for GST registration will be facilitated through a very simplified process of registration in which registration may be granted on the portal within three working days from the date of successful submission of applications,” he said.

Further, in such cases, neither the applicant will be required to visit tax offices, nor tax officers will be required to conduct any physical verification of the business premises. “This approach will not only ensure ease of doing business but also help streamlining and smoothening the registration under GST,” the first official quoted above said. At the same time, it will also reduce the burden on tax officials, allowing them to prioritise high risk applications.

Four-tier structure

A four-tier structure has been included in the proposed mechanism. The first tier would involve new and small businesses. “This will be meant for business that either do not wish to pass on or pass only a limited amount of ITC. For such applicants, registration may be granted within three working days just based on Aadhaar-based authentication,” the second official said. Successful applicant will not be allowed to pass on ITC above a specified limit in a month.

The second tier is proposed for risk free or deemed trusted business, categorised on the basis of better compliance record of any kind of tax and other statutes. Such businesses could be public sector companies, government entities, local bodies or private limited companies. Another parameter for selection could be paying certain amount of GST in cash during last fiscal year on existing GSTINs or paid income tax during last three years exceeding a certain limit beside others.

“These businesses could also be granted new registration within three working days without biometric Aadhaar authentication or physical verification,” he said while adding that this category may be allowed to pass on ITC without any limit.

The third tier is proposed for existing businesses, which wish to pass on ITC more than specified limit but not a deemed trusted entity. These may be required deposit non-refundable application fee, a fixed deposit and an assurance/NoC from deemed trusted businesses.  The fourth tier is proposed for change of category of businesses in order to pass on ITC more than the specified limit.

The first official said that since ‘in-principle’ approval has been received. Now, the Law Committee will discuss amendment in law and rules, the guidelines and accordingly, the mechanism can be rolled out in phases beginning with new and small businesses.