Registration under GST regime - Critical Points

Date of registration

One bone of contention that could open Pandora box of litigation is the proposal to allow ITC from the date of registration and not prior to the date of registration. A number of judicial pronouncements have ignore such procedural infractions of not taking a registration and allowed substantive benefit of Cenvat credit. The report of Joint Committee on GST registration also accepts that such a provision may not stand judicial scrutiny yet is mulling legislative introductions to deprive assesse of ITC before date of registration.

When a factory is getting ready but is not in the stage of registration as ground plan etc are not prepared, Business houses do order purchase of capital goods so that factory can start operations as soon as it is ready. If ITC is not allowed prior to date of registration, it would cause undue hardship, especially in bonafide cases.  Instead, it would be equitable that ITC is allowed but penal provisions are introduced which would act as a deterrent to intentional and malafide cases.

Seller-Purchaser mismatch

It appears that one of the most important conditions for allowability of ITC would be that the seller has uploaded correct details and have paid appropriate tax. There must not be any Sale-Purchase-Tax mismatch. Now, there is every possibility that a genuine buyer may be deprived of ITC and subject to harassment because of a mistake, intentional or otherwise, by the seller. For e.g, a normal dealer has been transferred to Compounding scheme yet charges full rate of tax on invoice. Online system will not allow credit as the seller would be reflected as compounding dealer but he has charged full rate of tax. Suitable provisions must be introduced to safeguard the interest of the buyer in this regard. 

PAN is mandatory

Under GST regime, registration will not be allowed without a valid PAN. It is mandatory for Directors/MD/Authorized Signatory. Consider a start-up scenario, what if the Authorized Signatory does not have PAN or is not assessable to Income Tax? Does he/she have to mandatorily apply PAN to take GST registration?

Cancellation of registration prospectively

A good point is that registration will be cancelled prospectively. Under state laws, registration is cancelled left right and center retrospectively and buyers are deprived of ITC. Hence this would be a welcome relief for buyers.