To help taxpayers, the Government had enabled the Aadhaar authentication method for GST registration. With effect from 21 August 2020, the Central Goods and Services Tax Rules had provided that, ‘in cases where Aadhaar authentication is either not opted for by the applicant or when such authentication has failed, the authorised officer has to initiate a physical verification of the premises mandatorily which is said to be SOP for physical verification under GST. In cases where the physical verification is difficult, the officer can ask the taxpayer to submit additional documents for verification before granting the registration under SOP for physical verification of GST registration. Furthermore, if the proper officer has not issued any notice within the 21 days, the taxpayer was deemed to be registered under the GST law.’
However, on 27 November 2020, the Central Board of Indirect Taxes and Customs (CBIC) issued a Standard Operating Procedure SOP verification which is SOP full form in income tax for taxpayers who were granted deemed registration. The department has issued this SOP for GST registration to ascertain the genuineness of businesses.
To complete the physical verification of GST registration SOP of such taxpayers, the following instructions are issued for immediate compliance:
- All deemed registrations will be subjected to a compulsory post-registration verification.
- On completion of the verification, if the authorised officer believes that the registration needs to be cancelled, he/she can initiate the cancellation proceedings under rule 22 of the CGST Rules.
- In case a physical verification is pending, a notice in FORM REG-17 may be issued to the taxpayer. This notice will be issued based on the following risk parameters:
- FORM GSTR-1 is filed and FORM GSTR-3B is not filed (either for August or September 2020),
- The difference in tax amount, as reported in FORM GSTR-1 and FORM GSTR-3B is more than INR 1 lakh. (Tax shown in GSTR-1 is more than that shown in GSTR-3B).
Note: Notice in FORM REG-17 seeks an explanation from the taxpayer regarding the differences and anomalies noticed
- The verification should be completed within 3 weeks.
Standard Operating Procedure (SOP) for GST compliance
- The authorised officer should conduct physical verification of the principal place of business. Wherever possible, the additional place of business (indicated in GST registration FORM REG-01) should be verified as well after SOP approval process.
- During the physical verification of SOP validation, the officer is expected to verify the following:
- Capital goods installed: In case the taxpayer intends to carry out manufacturing activities, the officer has to verify whether the capital goods (if) required have been installed or not.
- Electricity connection and bills paid in the relevant period
- Size of the premises: This is checked to confirm whether the premise commensurates with the business requirements.
- Ownership/Rental details of the premises: The related documents need to be verified here. In case of doubt, an enquiry may also be made from the landlord/ owner of the property in case of rented/leased premises.
- The number of employees already employed and record of their employment.
- Aadhaar and PAN of the taxpayer and its Proprietor, Partners, Karta, Directors as the case may be and the authorised signatories.
- Confirmation from the bank that the taxpayers KYC is up to date.
- In addition to the physical verification, the authorised officer in the interest of revenue will carry out the preliminary financial verification of the taxpayer. For this, the following documents will be required:
- Income Tax Returns of the Proprietor/Partners/Karta/Company/LLP from the date of incorporation or for the last three financial years, whichever is lesser.
- The status of activity of all the linked bank account(s). This may be taken through a letter/undertaking from the taxpayer. Phone numbers declared/linked to each of the bank accounts may also be obtained.
- Quantum of capital employed/proposed to be employed.
- Details of capital employed (own funds/loan funds).
- Audited balance sheet for the previous financial year (if capital includes own funds).
- Proposal submitted to the Bank/FI for approval (if capital includes loan funds).