GST New Rules
The GST Council has proposed an overhaul of the GST registration process and suspension of business registrations identified as risky. In order to tighten the compliance measures and target restrictions on organizations identified as risky, the law committee of the council comprising central and state officials who advise its ministerial members has brought in the proposal.
The recommendations in the proposal include the use of Aadhaar or biometric identification similar to Aadhaar for new registrations, steps to identify businesses that create a risk of revenue loss for the exchequer, using income tax returns to verify the credentials of entrepreneurs looking for GST registration, and restricted usage of tax credits from the purchase of raw materials to meet the final tax liability.
Currently, in India, there are around 600,000 dormant GST-registered companies among the 12 million entities with registration. Among the steps proposed, not filing GST returns for six months could cost a business its registration. Entities looking for GST registration will be profiled on the basis of their credentials classified into trustworthy and others.
Entrepreneurs who have a credible income tax payment history is under the trustworthy category. Their identity authenticated by Aadhaar and have no history of having their GST registration canceled. These people will get the GST registration within a week. For entrepreneurs who are not under the trustworthy category, the registration will be given within two months of physical verification of business premises. These people may also be asked to pay a part of their tax liability in cash instead of adjusting it fully against the tax credit available to them.
This move shows a major tightening of the three-year-old indirect tax system leveraging GST’s ability to track the entire supply chain using the system of input tax credits. Any discrepancies identified will get flagged, as the system for filing GST returns becomes more automated with the use of e-invoices and auto-filled tax returns.
The Central Board of Indirect Taxes and Customs declared that GST e-invoicing will be mandatory from Jan 1, 2021, for any business whose revenue exceeds Rs. 100Cr. Earlier it was set for the business whose revenue exceeds Rs 500Cr. The reforms will affect a remarkable number of medium-sized firms in the field of e-invoicing. From April 1, 2021, it is planned to be made available to all taxpayers for B2B transactions.