26.05.2023: Hunt for fake GST registration may turn heat on minnows of e-commerce

Small businesses that sell goods through e-commerce platforms fear a recently launched drive against fake Goods and Services Tax (GST) registrations could hit them hard because many of them run operations through co-working spaces or shared warehouses practices that may pose a hurdle during verification.

Central and state indirect tax authorities launched a two-month drive on 16 May to weed out entities that secure GST registrations wrongfully, generate fake invoices and pass on bogus tax credits to other entities without any actual sales. The campaign seeks to eliminate fake input tax credits, which the authorities blame for revenue losses.

Vinod Kumar, president of the India SME Forum, a not-for-profit with close to 100,000 members, said in an interview that the drive to eliminate fraudulent GST identification numbers (GSTINs) is creating challenges to genuine online sellers.

“Today many small e-commerce entrepreneurs are operating from their home or from a co-working space where many businesses share their addresses,” said Kumar. “They may not have their physical documents ready to show to visiting officials.”

Many small and micro firms selling goods through online platforms may inadvertently get snared in the drive against fake GST registrations and risk losing their GST registrations, he said, adding that cancellation of GST registration is not a solution to deal with the issue of fake invoicing.

Kumar also said many small businesses do not have the resources to hire professionals and deploy technology to automate compliance requirements.

An email sent to the finance ministry on Wednesday seeking comments for the story remained unanswered at the time of publishing.

The Federation of All India Vyapar Mandal, a national body of traders and retailers, on 18 May wrote to finance minister Nirmala Sitharaman seeking directions to field officers not to go overboard in the drive.

The national president of the body, Jayendra Tanna, appealed to the minister in the letter to issue a “strict advisory” to keep a check on officers who are “going overboard and crossing the line.” Mint has seen a copy of the letter.

The government launched the drive against fake GST registrations as the indirect tax system that is strong in technology deployment and data collection allows the authorities to match data collected from various points in the supply chain to detect areas where revenue collections could be improved.

Due to improved efficiency in GST system, revenue collection has been going up. The Centre and states collected a record ₹1.87 trillion in April.

Source: Live Mint

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