GST registration gets easier as CBIC drops Udyam proof, sets seven-day limit for approvals

In a move that is expected to help a large number of MSMEs and businesses operating from co-working spaces, the Central Board of Indirect Taxes and Customs (CBIC) issued detailed clarifications on the registration process, restricting tax officials from rejecting applications on flimsy grounds and mandating processing of requests with successful Aadhaar authentication within seven working days.

The CBIC also directed officers to back claims of tax demands with documentary evidence and not accuse businesses of fraud merely because they underpaid tax or reported a discrepancy. The demands must be quantified, preferably financial year-wise, with a clear explanation of how the amounts were calculated, the CBIC said, preventing scope of arbitrary tax notices.

Any show-cause notice or tax demands must identify the alleged violation, the period involved, the supporting evidence and how the proposed tax, interest or penalty has been calculated, the board said. State and the central GST authorities cannot have parallel proceedings on the same matter.

The board issued more than half a dozen circulars Tuesday, seeking to reduce compliance hurdles and tax disputes. The circulars follow the decisions made at the GST Council's 57th meeting on October 8, where it decided to simplify the registration process, do away with arrest powers of tax officers, raise the prosecution threshold to ₹5 crore from ₹1 crore and decriminalise a large number of offences. The council also decided to remove the bottleneck for refunds and input tax credit for exports and other businesses.

"The latest clarification will bring greater certainty, consistency and standardisation in tax administration," said Saurabh Agarwal, tax partner at EY India. Consistent implementation across field formations will be key to the effectiveness of this move, he said.

Exporters of services can meet applicable payment conditions through approved rupee-based accounts, including special rupee vostro accounts, subject to Reserve Bank of India rules and foreign trade requirements.

For goods exporters, the deadline to receive overseas payments will follow RBI-prescribed timelines, including permitted extensions. If an authorised dealer bank allows an export payment requirement to be written off, the department will not seek repayment of related GST refund to the extent of that write-off.

The board allowed authorised car dealers operating under the agency model to claim tax credit on demo and test drive vehicles and offered clarity on credit claims to banks and businesses that receive tax credit through distributors.

Businesses receiving tax credit through an input service distributor must check whether they are entitled to claim it and reverse any ineligible amount. Distributors must report eligible and ineligible credit separately in their returns.

Banks and NBFCs will not face adverse action over differences in how they reported GST credit in past returns.