Aadhaar Authentication for GST Registration: A Step Towards Curbing Fake Firms

The Goods and Services Tax (GST) Council is contemplating a proposal to enforce biometric-based Aadhaar authentication across India for individuals seeking GST registration who raise suspicion. This move aims to curb the menace of fake registrations and fraudulent input tax credit (ITC) claims.

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Pilot Projects Yield Positive Results

Currently, two states, Gujarat and Andhra Pradesh, along with the Union Territory of Puducherry, have implemented Aadhaar authentication for taxpayers on a pilot basis. The outcomes have been promising, with a significant reduction in the number of registration applications in Gujarat. This indicates the effectiveness of these measures in deterring individuals from using others' identities to create fictitious ITC firms.

Encouraging States to Adopt Aadhaar Authentication

Given the encouraging results, the Central Board of Indirect Taxes and Customs (CBIC) chief, Sanjay Kumar Agarwal, expressed the likelihood of more states opting for Aadhaar-based authentication. He emphasized the need for uniform implementation across all states to safeguard revenue from the adverse effects of fake registrations.

Transition from OTP-Based to Biometric Authentication

Previously, GST authorities relied on OTP-based Aadhaar authentication to verify the identities of registration applicants. However, instances of identity misuse for creating bogus firms to claim ITC prompted the CBIC to shift towards biometric authentication. Under this system, individuals seeking registration in certain suspicious cases will be required to visit an Aadhaar center for biometric verification.

GST Council's Decision

The decision to implement Aadhaar-based authentication across all states rests with the GST Council. While no such proposal has been presented to the Council yet, Agarwal indicated the possibility of a future proposal seeking their opinion on the matter.

Combating Fake ITC Syndicates

The CBIC has launched a concerted drive to combat the masterminds behind fake ITC syndicates. Policy measures have been implemented to strengthen the registration process, including risk assessment and physical verification of applicants.

GST Fraud Detection and Recovery

Since the inception of GST on July 1, 2017, tax authorities have detected a staggering Rs 1.42 lakh crore worth of fake ITC and recovered Rs 13,000 crore. Additionally, 1,350 individuals have been apprehended for defrauding the exchequer.

Collaboration for Taxpayer Identification

Agarwal highlighted the importance of data exchange with other government agencies, particularly the Income Tax Department, in identifying potential GST taxpayers.

The GST Council's consideration of mandatory Aadhaar-based authentication for suspicious GST registrations demonstrates the government's commitment to curbing tax fraud and ensuring a robust and transparent GST regime. By leveraging biometric technology, the authorities aim to deter fraudulent activities and safeguard the integrity of the tax system.