The ongoing drive against fake GST registration by the Central Board of Indirect taxes and customs (CBIC) has created many issues for e-commerce players in the country. This has led many companies doing business in various states across the country coming under the radar and in many cases are being branded as fake entities.

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The online players have raised issues with the physical on ground verification by GST officers because these players maintain virtual offices in many places with minimal staff and no books of accounts. The industry has raised these issues with the government over the last one month as they continue to face multiple issues. The two-month drive against fake-GST registrations was started by CBIC in May.

According to the CBIC, the government’s recent two-month drive against fake GST identified around 45,000 entities and has detected evasion of around Rs 13,900 crore. The CBIC has blocked input-tax credit of Rs 1,430 crore till now. Authorities investigating fake GST registrations, rely heavily on the physical location of a company, visiting the offices to assess the account books.

In the case of e-commerce players, many registered offices are virtual with minimum or no staff present. Tejinder Singh, VP and Head of Tax, Make My Trip Group, told CNBC-TV18 that the company has faced many problems in various states because of the ongoing drive.

“This recent GST drive has caused a lot of pain to us, the officials have seen virtual offices as fake registrations. We maintain virtual offices in states and the field officers have mistook these offices as fake registration, however we were only using these offices for tax payment, there was no ITC flow or fraud being committed using those registration. We are looking to speak to the government for this. If I am a genuine taxpayer I should be allowed to take virtual registration in some states. Many of our registrations have come under the compliance radar because of this,” said Singh.

Not just the big players, the impact of getting branded as a fake registration is haunting the smaller online players more. In many cases, smaller players now want to run businesses from one state only to minimise compliance and to avoid cancellation of registrations.

“The basic issue with small enterprises is that we have to have GST registrations across states in which we operate. I need to either have a rented place or my own place for GST registrations. The option that a small online player has is to either take a shared warehouse or a co-working space to register my GST. We have received more than 2000 SOS calls from various entrepreneurs," said Vinod Kumar, President, India SME Forum.

"The most impacted people in this are small entrepreneurs who have to do HST compliance in various states and have a CA in all states that we have to pay. This impacts smaller companies more than bigger entrepreneurs. I have certain cases in which entrepreneurs have given up and shut down in various states to avoid cancellation of registrations. People at the bottom rung do not have the wherewithal to have lawyers and auditors don’t want to get into these issues,” he added.

However, the CBIC has maintained that the line of distinction between a fake registration and an e-commerce virtual office can be very thin. Officials say companies with virtual offices must satisfy queries of GST officials.

Speaking at the FICCI GST Conclave, Shashank Priya, Member GST, said, “Since there is a requirement to have records kept at the place of registration, there should be an electronic means of fetching the records and showing it to the GST officers to satisfy that you are legitimate registrant, even if you have a virtual office. Sometimes when the officers go to these virtual offices, the administration there says that the record books are not with us, they are with the head office. That creates a suspicion.”

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(Edited by : Sangam Singh)

First Published:Jul 4, 2023 6:18 PM IST