Ref: CAAS/Representations/2021-22/06 Date: 26-08-2021

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Ref: CAAS/Representations/2021-22/06 Date: 26-08-2021

To,

The Chairman,

Central Board of Indirect Taxes & Custom,

The Ministry of Finance,

New Delhi – 110001

Sub: GST Circulars Incongruous with Ease of Doing Business

Respected Sir,

With reference to the above captioned subject, we at Chartered Accountants Association Surat

(CAAS) representing Chartered Accountants, Tax Practitioners, their staff members and

businesses (hereinafter referred to as “Stakeholders”) would like to draw your attention towards

the incongruous circulars pertaining to GST registration, which are presently choking the

economic growth of India. Do have a patience reading to know how.

Our Representation:

With the amendment of Rule 9 and 25 of CGST Rules 2017 w.e.f. 21st August 2020, India

ushered to a post-COVID growth era marked by expedited GST Registrations granted through

Aadhar Authentication. Stakeholders were happy with the ease of doing business, however their

happiness was short-lived. While many upcoming start-ups and businesses intended to get

under the GST Tax Net and honestly comply with the GST Law, the crippling approach of the

GST Officials stemming out from various stiff circulars and orders, land these honest

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entrepreneurs in a retreated position. Once such bottleneck document is Instruction

No.4/3/2020 dt.27th November 2020 laying the SOP for verification of new GST Registrants,

with a primary aim of reducing fake invoicing. However, the level of this hare-brained

instruction can be understood from the below mentioned Questionnaire of Absurdness which

fails to meet its intended objective and instead making the remedy worse than the disease

itself. Let us talk openly on the tabooed topic:

Questionnaire of Absurdness (Para 4.2 and 4.3 of Instruction No.4/3/2020 dt.27-11-2020)

Sr.

No.

SOP Question What If.? Not complied Does it help in countering

bogus billing.?

1 In case the applicant

intends to carry out

manufacturing activity, whether capital goods,

if required for the said

manufacturing activity,

have been installed.

Not all manufacturing activities

require machineries. In some start-ups,

GST Registration is required prior to procuring machinery to avail the GST

Credit e.g. Import of machineries,

import of services. In some other

cases, where the machines are

required, it is not necessary for the Principal Manufacturer to invest in the

machinery, but instead get the

manufacturing done on job work basis.

This process is already clarified in

Sec.143 of CGST Act. The production thus achieved can be also directly

supplied to the customers from the

premises of the job worker. Hence,

this question is irrelevant.

Pertinent question here is - will such

manufacturers be denied registration,

simply because of no machinery.?

No.

Still a fake biller can temporarily install rented

machinery to the

satisfaction of the officer

concerned.

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2 Electricity connection,

bills paid in the

relevant period.

Payment of electricity bills is no such

criteria of a genuine business. During

the times of pandemic and even thereafter, various businesses stretch

their best in juggling the cash flows,

whereby taking full advantage of

credit and paying on the last date.

Even if such things are lethargic and indisciplined, such a criterion to judge

a business is totally absurd.

Will the registration of such applicant be

rejected simply for non-payment of electricity bills, which is never the

purview of GST Officials.?

No.

A fake biller would take premises on hire where

electricity bills are fully

paid.

3 Size of the premises –

whether it is

commensurate with the

activity to be carried out by the applicant.

Size of the premises is such a complex

question that not even the

entrepreneur can answer it correctly. It

depends on the business model, stage of the business, product life cycle,

demand and supply. More importantly,

this question is based on technical

expertise and best judgement of one's own business. A GST Official is not

competent to question the sufficiency

of the size of premises or propriety of

its selection.

Will the registration of such applicant be

rejected merely due to smaller premises

during starting phase of the business or

the registered address being an office

situated at a residence.?

No.

A fake biller may take huge

premises on hire to show-off his fake business as a big

one.

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4 Whether premises is

self-owned or is rented

and documents relating ownership/ registered

lease of the said

property. In case of

doubt, enquiry may also

be made from the landlord/ owner of the

property in case of

rented / leased

premises.

Despite having full ownership of the

premises, the applicant is required to

furnish NOC from the President/Chairman of the Society in

which the premises are situated. When

the ownership is not doubtful, then

asking for such NOC is totally absurd.

Will the registration application of such

applicant be rejected on the grounds of

not furnishing such NOC, despite he

being the sole and clear owner of the

premises.?

No.

A fake biller might fetch a fake land lord as well to the

satisfaction of the GST

Officials

5 No of employees already employed and

record of their

employment

In most proprietary concerns, where proprietors are self-employed even

employment is not required. The

proprietor himself supplies goods or

services e.g. Accountant, Engineer,

handicrafts and handlooms, small ECO Participant, freelancer, job worker,

tuition-classes, videography services

etc. Also, there may be cases like

providing services of an Independent Director which does not require

employment to anyone else. In other

cases where the business is in its

starting phase, there are no employees

recruited. GST registration is required for availing GST credits on capital

goods or even on smallest benefit

from purchases in the form of ITC.

Mandating an such question as a part

of stereotyped questionnaire is totally

No.

A fake biller would create a

fake employee salary

register as well and may

even produce these fake employees.

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absurd.

Will the registration application of such applicant be rejected on the grounds of

not recruiting any employees.?

6 ITRs of the company /

LLP from the date of

incorporation or for last

three financial years, whichever is less. ITRs

of proprietor, partners,

Karta, etc. may be taken

in other cases.

A new entrepreneur may not have any

Income Tax background. Besides,

GSTN being a PAN-centric system,

return filing status can be directly fetched by the GST system from the IT

Portal. However, the officials should

refrain from asking this kind of

questions, especially when the Income

Tax Portal is not working.


applicants be rejected if they are non-

filers (either wilfully or due to low

income) under Income Tax Act and want to do business and grow themselves.?

No.

A fake biller would first file

Income Tax Return and match the Turnovers and ITC

under both Income Tax and

GST laws.

7 The status of activity

from the date of

registration of all the

bank account(s) linked to registration; the

same may be taken

through a letter /

undertaking from the

applicant. Phone number declared /

linked to each of the

bank accounts may also

be obtained.

In newly opened bank account, there

are hardly any transaction entries to

show any activity. At times phone

numbers linked to the bank accounts are not functional, or wrongly mapped

or mapped with the main family

member who looks after the finances

of a proprietary concern.


applicant be rejected just because of

mis-mapping of mobile numbers linked

to the bank account.?

No.

A fake biller would

periodically update the bank accounts with the mobile

numbers with fake SIM

Cards

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8 Quantum of capital

employed/proposed to

be employed.

In case of own funds,

also check the audited

balance sheet for

previous financial year, where available, in

addition to the Income

Tax Returns mentioned

above.

An ordinary MSME entrepreneur would

never know how much capital he has

employed on an upto date basis and also it is a tough ask for him to furnish

a forecast of proposed capital. Even if

answered, the same need not be the

correct answer.


applicant be rejected just because of

lower capital employment or his failure

to correctly spell out his future proposed

capital employment to the GST Officials.?

No.

A fake biller would already have planned the capital

employed and would be

answering as per the preset

forecasted Project Report

9 Loan Funds: (indicate

the names, complete

address, PAN and

amount borrowed from

each such lender separately).

In case of loan funds

check the proposal submitted to the

Bank/FI for approval of

the loan and the

maximum permissible

bank finance as per such proposal, where

the amount is proposed

to be borrowed from a

Bank and/or FI.

Asking such intrusive questions is only

allowed by law to be asked by the

Income Tax Officials or by Lending

Banks by virtue of an agreement.

Asking such questions is outside the purview and authority of the GST Law.

The same question may be answered

if suitable amendment be brought in

the statute.

Thus, pertinent question is - will the

registration application of such

applicant be rejected on the grounds of

not providing full details of Loan Funds like name, address, PAN, Amounts

borrowed on the site during the

verification.?

No.

A fake biller would already

be having fake Loan funds

for which all details would be handy

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From the document it is evident that the Government does not seem to let new entrepreneurs

come out and join the trade and industry community in the guise of countering the menace of

fake invoicing. It requires a plethora of details from the new registrant similar to Project Report

submitted to a banker for availing credit facilities. This was not a situation the trade and

industry had subscribed for, at the time of happily accepting the GST law. The process of

obtaining new registration under GST is one of the biggest impediments in ease of doing

business. Further, despite demanding so many clarifications, it is not guaranteed that the risk of

fake billing would be mitigated. In such a scenario, the best option is to trust your countrymen.

Whenever we represent any issues, we are asked for the practical instances. However, the core

focus of the officials while comprehending the respective instances is to resolve them and put

a green tick for their task is complete. However, we are sharing an illustrative list of instances

without revealing the names of the applicants to save them from future harassment, with the

sole aim to bring to the notice of all concerned that such cases of harassment are happening

during the process of GST Registration across various cities of Gujarat by the State GST Offices

on the basis of policy instructions issued from CBIC. Unless these policy matters are not

resolved quickly at the top levels, the grip of these choking hands would slain the economy.

Have a look at the 59 instances of absurd GST Registration queries in Annexure-A (Click Here)

covering instances from cities of Surat, Ahmedabad, Mehsana, Ankleshwar and Vapi. These are

the results of a flawed departmental instruction which has mutated to a next level of

harassment. Types of queries raised against which we have the following objections:

1. Affidavits and Notarized Consent Letters:

The Department of Administrative Reforms and Public Grievances under The

Ministry of Personnel, Public Grievances and Pensions had vide Letter No. D.O.

https://bit.ly/38dbIkz

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No. K-11022/67/2012-AR dt.17th July 2014, had initiated process for abolition

of affidavits/certification and adoption of self-certification. Hence, demanding

notarized consents for GST registration tantamount to invoking actions

restricted by the GOI. Such ultra-vires actions should be avoided.

2. Documents not legible:

Even though a lot of documentation is asked by the GST Officials at the time of

registration, yet a limited 100 kb and/or 1.99 MB submission is allowed. Despite

these odds of file compression, when documents are properly submitted,

remarks of documents not being legible are raised, just to harass the applicants

which should be avoided. This submission limit should be enhanced to 20 MB.

3. Demand for Business Registration Certificate / Gumasta Dhara Certificate:

Business/Shop registration/Gumasta Dhara Certificate details are not required

vide your internal instruction No.4/3/2020 dt.27/11/2020 and should not be

asked for during the registration process.

4. Asking for details of CA/Consultants and their KYC Documents:

Why such kind of details pertaining to CA or consultant is asked for. Is it that

CAs or consultants would be doing the business on behalf of the applicant.?

Such kind of absurd questions should never be asked whether or not required in

your internal instruction No.4/3/2020 dt.27/11/2020.

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5. Concerns raised for Commercial activity from Residential premises:

Any kind of business can happen anywhere. Even the PMO and Health Ministry

had been promoting Work From Home (WFH). Also, post GST implementation, by

virtue of Sec.143 of CGST Act, 2017, now Principal Manufacturers having office

at residential place may purchase goods, deliver it to job worker and also

remove the same directly to their customers. Hence, barring the use of any

premises simply on the basis of its nature is absurd and short sighted. Further,

while the entity is in starting phase, commitments for warehouses or expensive

godowns is simply a luxury for small tax payers. Further, GSTIN is a prerequisite

for starting any business. A proponent of business or profession first takes

GSTIN and then moves ahead with other formalities in order to save

commitment costs and loss of ITC on initial purchases. Such absurd questions

on the feasibility of business should never be asked for whether or not required

by your internal instruction No.4/3/2020 dt.27/11/2020. The tax payer is asking

for registration under GST and not seeking high end approvals from GST

department under explosive license, environment, factory license or fire and

safety. Besides, these questions are outside the scope and authority of the GST

law.

6. No Specification or remark of the deficiency:

Due to such rejection without sufficient remarks, the applicant becomes clueless

about what had gone wrong for taking the registration and what has to be

resolved. Adequate clarification should be made in GST REG-03.

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Bottlenecks in the present GST Registration Scheme are:

1. If Aadhar Authentication fails or is not opted, a physical verification has to be

conducted on the premises mentioned in the application. However, due to paucity or

perhaps lethargy of manpower especially in State GST Offices, physical verifications are

delayed by converting either into time passing queries or straight way rejections.

2. As per amended Rule 9(5), GST Registration has to be granted automatically on deemed

basis if no queries are raised within 7 working days of application or submission of

clarification to queries. However, this time limit does not apply to non-Aadhar

authentication cases, for which a lengthy 30 days’ time limit is given. This time limit

again increases in case queries are raised by the department.

3. Instruction No.4/3/2020 dt. 27th November 2020 is altogether absurd and impractical.

Yet taking the shield of the said instruction most GST officials delay or reject the grant

of GST registrations by raising absurd and irrelevant queries outside their scope and

authority.

Talking of the impact of such absurd instructions on the registration; it has hit the Proprietors,

Partnership firms and such other MSME forms of constitutions, the most. To understand this, we

have the total GST collection since implementation and the number of cumulative registrants

till 30th June 2021 as follows:

Constitution of Business Actual Tax Payers Total Collection

(Rs. In Crores)

Public limited Company 75,295 11,42,985

Private Limited Company 7,79,219 9,00,969

Proprietorship 1,03,98,893 4,33,255

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Public Sector Undertaking 2,795 2,87,004

Partnership 13,80,441 2,38,446

Others 29,573 83,638

Society/Club/Trust/AOP 1,19,941 44,683

Limited Liability Partnership 85,081 34,981

Government Department 7,382 33,573

Statutory Body 1,036 17,183

Foreign Company 1,784 12,858

Hindu Undivided Family 82,763 8,385

Local Authority 6,338 6,457

Unlimited Company 95 342

Foreign Limited Liability Partnership 110 41

Any other body notified by Committee 88 11

Total 1,29,70,834 32,44,811

*Source: https://www.gst.gov.in/download/gststatistics

From the above table it can be inferred that proprietorship entities are in highest number and

forms more than 80% of the total actual tax payers and also rank 3rd with 13.35% contribution

towards the total collection of revenue. Yet the proprietorship concerns are neglected while

granting ease of doing business.

https://www.gst.gov.in/download/gststatistics

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0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

2017-18Avgp.m.

2018-19Avgp.m.

2019-20Avgp.m.

COVID-19

(Apr-20)

COVID-19

(May-20)

Jun-20 Jul-20 Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21 Feb-21

Mar-21

82.29 98.11 101.84 32.17 62.15 90.92 87.42 86.45 95.48 105.16 104.96 115.17 119.87 113.14 123.90

Rs in

Cro

res

Monthwise GST Collection Pre and Post issuance of Instruction for Registration since implementation

(Rs. in Thousand Crores)

From the below chart it is clearly evident that the average collection of GST per month is

roughly around 1 lakh crores which after the pandemic was gradually on the rise.


Without billing there is no top line and eventually no business. GST registration has become

such a cardinal start-up service that if GST registration is not granted, one cannot raise invoices

or run their business. We are in a situation when GST department decides whether one does a

business or not. Under Article 19(1)(g) of the Constitution of India, every Indian citizen has the

freedom to practice any profession or to carry on any occupation, trade or business which is


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legal. Where any person has not done anything illegal, a contention of restricting some

business since its actions “may” result into something illegal on the surmises, is a blow to the

fundamental rights of the citizens.

On one side the department is keen to run drives spending hefty money for bringing more and

more businesses under the GST net, while on the other, instructions for strict verification and

rejection have created a havoc and growth of new businesses is being hampered. The growth in

orange bars of the above chart is organic and without participation of new entrants. Had new

businesses been allowed to do business, the growth story would have been something else.

To know how many such unfortunate businesses were not entertained, have a look at the table

of registrations below:

Particulars Pan India In Gujarat

Cumulative GST Registrations upto 30th June

2020

1,23,11,104 10,10,461

Migrated cases having existing businesses -53,28,537 -4,34,052

Cumulative Fresh GST Registrations post

implementation of GST upto 30th June 2020

(in 3 years)

69,82,567 5,76,409

Average Annual Fresh Registrations 23,27,522 1,92,136

Actual Fresh Registrations from July 2020 to

June 2021

9,41,117 87,184

Shortfall Against Annual Average Fresh

Registrations

13,86,405 1,04,952

% Applicants that were registrable

but not registered from July 2020

to June 2021

59.57% 54.62%



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This is a policy-based issue and not a person-based issue. Amendments to laws are

recommended by FMO. Rules and Instructions are issued by CBIC. The solution to this problem

can be found only by taking a holistic top-down approach. Hence, the letter is escalated to the

Chairman GST Council, Finance Minister, Revenue Secretary, State Finance Minister, State

Finance Secretary and Commissioner of State Tax to take active cognisance of our demands

based on the below mentioned hard facts:

1. Prior to the amendment of Rule 9 of CGST Act, 2017, the overall time limit for

automatic grant of registration was 3 working days if no queries were raised, without

any discrimination as to Aadhar verified or not. However, physical verification has to be

carried out for both Aadhar authenticated cases and unauthenticated cases. Thus, we

demand that Rule 9 be suitably amended such that the time-limit for issue of

registrations for Aadhar authenticated cases be reduced to same working day as

application and unauthenticated cases within 7 working days. Physical verifications can

take place any time to the satisfaction of the GST Officials within 15 days, and if not

found satisfactory the Officials may cancel the GST Registration under Rule 22. Reason

for physical verifications to get completed within 15 days is that such period is less

than the maximum number of days allowed after a month to file the GST Return. Any

fake registrant can be eliminated before they can spread their fake invoices, just before

the cut-off of monthly GST return filing. This will ease up doing business vis-à-vis put a

check on the fake billing.

2. Necessary manpower with requisite knowledge is the purview of GOI and GOG’s

personnel department. When the essential services mandated by the statute are

rendered by the Government, no excuse relating to shortage of manpower is pleasant to

ears.

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3. Registration should be granted with effect from the date of application and not from

the date of issue.

4. Instruction No.4/3/2020 needs to be withdrawn in the interest of trade and industry.

5. To provide the ease of doing business, registration process should be easy and

frictionless devoid of contact with the GST Officials. The intended SOP should be

taxpayer friendly and in the interest of honouring the Citizens Charter. Verification

should not be intrusive or offensive, that the new registrants be suspected as wrong

doers. Registration under GST is a first step in winning the heart and mind of a tax

payer, and accordingly the tax payers should be welcomed.

We hope that the Government appreciates the fact that not all people are wrong doers and

honouring the honest would be side-lined when if one looks with the tinted spectacles. We also

hope that meeting our above demands would help you achieve your goals of ease of doing

business. We look forward to your response on the above.

Thanks & Regards,

For Chartered Accountants Association, Surat.

Chairman – IDT Committee | Secretary

Copy to: -

(1) Chairman – GST Council

Tower II, 5th Floor, Jeevan Bharti Building, New Delhi – 110001 - for information only

(2) Finance Minister,

Ministry of Finance,

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134, North Block, New Delhi – 110011. - for information only

(3) Secretary (Revenue),

128/A, North Block, New Delhi – 110001 - for information and follow up

(4) Finance Minister (Gujarat),

Swarnim Sankul-1, 2nd Floor, Sachivalaya, Sector-10

Gandhinagar-382010

- for information only

(5) Secretary (Finance Department),

4th Block, 5th Floor, Sachivalaya, CH Road, Sector-10,

Gandhinagar - 382010.

- for information and follow up

(6) Commissioner of State Tax (Gujarat),

Rajya Kar Bhawan, Near Times Of India Office, Ashram Road,

Ahmedabad – 380009

- to ensure co-ordination with CBIC for

registration process to work under legal

framework