GSTN Restores the Deemed Approval Process for GST Registrations

The Goods and Services Tax (GST) authority has lifted the ban on deemed approval for GST registrations. The ban was imposed during the lockdown period in the view that the facility could be misused as the GST departments across the country were not properly functioning. Few states had reported the trend of newly registered businesses being engaged in circular trading during the lockdown.

To register as a GST business, a taxpayer has to apply on the GST portal. The application will be allotted to either the central or state tax officials depending on the jurisdictions. According to the GST law, the official would process the application in three working days. However, if no action is taken, the same is deemed to be approved.

The GST policy wing issued directions that all registration applications as on 30 June 2020 that have remained pending till 15 July 2020 be granted the deemed approval. Also, the applications received after 30 June 2020 and pending till 28 July 2020 would be deemed approved.

The instructions stated that few registration applications were approved even during the lockdown due to technical glitches in GSTN. The GSTN has been requested to forward such GSTINs who obtained deemed approval during the lockdown to the concerned jurisdictional officers. In such cases, proper officers may do the physical verification of the principal place of business, if required.

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Many businesses had waited for a long time to obtain their GST registration confirmed during the lockdown period. Also, they found no help in raising the issues with the authorities. Most of such complaints were for GST registration applications submitted in April 2020 and May 2020.

The tax authorities witnessed a sudden increase in GST registrations during the pandemic period, even though other business indicators like e-way bills, tax collections, and GDP were dropped. Few states’ commercial tax department had found several cases of circular trading. In circular trading, the taxpayers issue fake invoices among each other to fraudulently avail Input Tax Credit (ITC) without actual supply of goods or services with unusual participation from businesses registered during the lockdown.

The process for deemed approval of the application for GST registration would be resumed from 01 August 2020, as the lockdown is lifted in all states. This is a welcome move for many genuine taxpayers who have struggled during the lockdown to obtain a GST registration. Also, the department has to evaluate the circular trading by setting specific parameters for the businesses who received GST registrations during the lockdown, and it has to take stringent actions to curb these types of fraudulent activities.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in