Last updated: October 14th, 2022 9:42 AM

Physical verification for GST registration

Recently, the Central Board of Indirect Taxes and Customs has come up with the Standing Operating Procedure for cases wherein physical verification of the business premises is mandatory, however, as per the GST provisions, the deemed registration is granted to such applicant. The relevant provisions and procedure are briefly explained in the present article.

Relevant provisions of mandatory physical verification under GST-

As per provisions of rule 9 of the Central Goods and Services Tax Rules, 2017, physical verification of the business premises of the applicant is mandatory under any of the following circumstances-

• The applicant has not opted for the Aadhaar authentication; or
• The applicant has opted for the Aadhaar authentication, however, the same has failed.

Based on the above provisions, it can be concluded that under any of the above circumstances, the GST registration will be granted post completion of physical verification by the proper officer. However, ironically, as per the provisions of deemed GST registration, if the proper officer has not issued any notice, registration will be auto granted to the applicant on completion of 21 days from the date of the registration application in Form GST REG-01. Due to the deeming provisions, unfortunately, the GST registration will automatically be granted even though the proper officer has not undertaken the physical verification of the business premises in due course.

The procedure of physical verification of deemed registered taxpayer -

To overcome the jeopardy, recently, the vide instruction no. 4/3/2020-GST dated 27^th November 2020, the Central Board of Indirect Taxes and Customs has come up with Standard Operating Procedure. As per the procedure, the proper officer will undertake the physical verification of the business premises in the following manner -

• The proper officer will carry out physical verification of the principal place of business.
• Also, if possible, the proper officer will also carry out the physical verification of the additional place of business.
• List of additional details which will be verified by the proper officer is -
  • Installation, if any, of the capital goods.
  • Electricity connections and bills paid, thereon.
  • Size of the business premises.
  • Type of  premises (i.e., ownership, rented or leased).
  • Number of employees.
  • Aadhaar and Permanent Account Number (PAN) of the applicant and proprietor/ partner/ Karta/ director as well as the authorized signatory.
  • Documents to be verified -
    • Income tax return of the applicant.
    • Income tax return of the proprietor/ partner/ director/ Karta.
    • Bank account details like -
      • Bank transaction undertook in the bank account post obtaining the registration.
      • Phone number linked with the bank account.
    • Details of capital employed (i.e., own funds or loan funds or both).

Based on the physical verification, the proper officer can initiate proceedings under rule 22 of the Central Goods and Services Tax Rules, 2017, in case if he has a reason to believe that the GST registration is liable to be cancelled. Additionally, during pendency of physical verification, the proper officer can issue a notice in Form GST REG-17 under any of the following circumstances -

• Cases, wherein, Form GSTR-1 is filed, but, Form GSTR-3B is not filed for the period August 2020 or September 2020.
• There is a difference of more than INR 1 Lakhs in tax amount as per figures reported in Form GSTR-1 and Form GSTR-3B.