To crack down on fraudulent claims of input tax credit (ITC), the commissioner of state taxes on Wednesday issued an order directing tax officials to conduct physical field verification of businesses whose GST registration welcome letters were returned undelivered by postal authorities.
GST officials have found that fake GST registrations were used to fraudulently claim ITC and generate bogus tax invoices. A common red flag in such instances was the use of fictitious business addresses, said commissioner Sarpreet Singh Gill.
“It was observed that in several cases, system-generated welcome letters were returned by postal authorities with remarks such as ‘insufficient address’, or ‘incorrect address’, or ‘address cannot be located’, or ‘no such person found at the address’, or ‘unclaimed’,” Gill said.
His order specified a strict chain of action once the letter was returned. The centralised registration cell must forward the returned envelope to the state tax officer (STO) within three working days. That STO must then immediately dispatch officials to physically verify the address and any additional places of business listed in the GST registration certificate.
Officials were also directed to examine all documents uploaded at the time of obtaining the GSTIN, and record statements of persons found at the business address.
The commissioner directed that the inquiry must determine not just whether the taxpayer was absent, but whether they ever had genuine access to the declared address in the first place.
In cases where field verification confirmed that the registered taxpayer did not exist at the declared address, or that the address was fictitious or unverifiable, the STO must initiate proceedings for cancellation of GST registration. Where the taxpayer was found to be genuinely operating at the location but the postal delivery failed due to a clerical discrepancy in the address, the official must record a statement of the authorised representative and direct the taxpayer to amend their registration details.
The order fixed a 30-day deadline for the STO to submit a detailed field verification report to the deputy commissioner of state tax (GST). Even after such reports are filed, all STOs must closely monitor GST taxpayers for at least six months for compliance, ITC utilisation, and any suspected behaviour, Gill said.
“The STO in charge of the ward office shall initiate prompt action in accordance with GST law based on the outcome of field verification, without waiting for any further instructions from head office or the GST registration cell, and shall ensure that the entire action is completed and taken to its logical conclusion within statutory time limits,” Gill said.
The order said that the move was part of a broader nationwide push to weed out fraudulent GST registrations, which were used to generate fictitious ITC chains, causing significant revenue loss to the exchequer.
