Pilot projects to test GST biometric and geotagging authentication during the GST registration process have been delayed due to disagreements over access to the Aadhaar identity database, a senior government official said.
However, the finance ministry is confident of rolling out both authentication measures – biometric and geotagging – in FY25, the official said. The measures are aimed at preventing the registration of fake entities and plugging false input tax credit claims under the Goods and Services Tax regime.
The government is tightening the GST registration process by using biometrics and geotagging of office buildings to curb the creation of fake entities and stem revenue losses to the exchequer. Currently, the identity of a person is established via OTP-based authentication using Aadhaar and PAN.
The Central Board of Indirect Taxes and Customs (CBIC) planned pilot projects in Odisha and Puducherry in the initial phase and in Rajasthan, Maharashtra and Gujarat in the next phase. However, there is no unanimity over accessing the UIDAI database during the trials.
“States wanted to do it in a certain manner, with which the Goods and Services Tax Network (GSTN) was not comfortable. UIDAI wanted to give database access to GSTN only. Everyone wants a single point of contact, UIDAI wants everybody to access through GSTN. GSTN is examining the issue as it is a policy decision. It is under discussion,” the official said.
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Despite the delays, the proposal for biometric and geotagging-based verification and the results of the initial pilot projects will likely be placed before the GST Council when it meets in the October-December period so that it can be rolled out in the next financial year. After the trials, the infrastructure requirements will be evaluated and the details will be worked out.
“Once the GST Council approves it, CBIC can take it forward. It will have to be seen how quickly the biometric and geotagging verification can be scaled up. But next fiscal year it should get implemented,” the official said.
Under the GST law, the place of business needs to be physical. In many cases, the address of an entity was found to be bogus. The government is now working towards making geotagging of addresses of all companies mandatory, while biometric authentication will be compulsory for entities considered risky.
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The CBIC uncovered 20,800 fake entities at the end of a two-month drive in July, detecting false input tax credit claims to the tune of Rs 19,500 crore. ITC allows GST taxpayers to claim credit for taxes paid on inputs used in the production of goods or services.
Bogus firms are usually created by using somebody else’s PAN and Aadhaar to get registered. Some people are said to make small payments to people to part with their identity documents to create fake firms.
However, the CBIC will have to ensure that the new verification processes do not slow down GST registration.
“It has to be quick access for registration. It has to be a very simple streamlined process because already there are complaints that registration takes up to 15 days,” the official said.
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