Understanding requirement of Aadhaar authentication / physical verification before GST Registration

Clearmytax.in Editorial Board

1.0 Introduction

Section 95 of the Finance (No.2) Act,2019 inserted four new sub-sections viz (6A), (6B), (6C) & (6D) in section 25 of the CGST Act,2017, to make Aadhaar authentication mandatory for specified class of new taxpayers and to prescribe the manner in which certain class of registered taxpayers are required to undergo Aadhaar authentication. It is pertinent to mention here that Section 25 deals with the procedure of registration. Although the Finance (No.2) Act, 2019 was promulgated on 01-08-2019,  the provisions of these for new sub-sections have been made effective from 01-01-2020 vide Notification No. 01/2020 – Central Tax, dated 01-01-2020.

Further as we know in order to make the provisions of a of any Section / Act operational, machinery provisions need to be in place. In this case the Rules to implement sub-section (6B),(6C) & (6D) have also been inserted in the CGST Rules, 2017, w.e.f. 01-04-2020 and thus three new sub-sections (out of four) have been effectively implemented from 01-04-2020. The remaining sub-section (6A) is still not operational in absence of Rules for implementing the same.

As Aadhaar Card authentication has been made compulsory for new registration w.e.f.01-04-2020, it is of utmost importance that we understand the new provisions. Let’s proceed….

2.0 New sub-sections inserted in Section 25 of CGST Act,2017

For ready reference the four newly inserted sub-sections to Section 25 of the CGST Act,2017 are reproduced below:

“(6A) Every registered person shall undergo authentication, or furnish proof of possession of Aadhaar number, in such form and manner and within such time as may be prescribed:

Provided that if an Aadhaar number is not assigned to the registered person, such person shall be offered alternate and viable means of identification in such manner as Government may, on the recommendations of the Council, prescribe:

Provided further that in case of failure to undergo authentication or furnish proof of possession of Aadhaar number or furnish alternate and viable means of identification, registration allotted to such person shall be deemed to be invalid and the other provisions of this Act shall apply as if such person does not have a registration.

(6B) On and from the date of notification, every individual shall, in order to be eligible for grant of registration, undergo authentication, or furnish proof of possession of Aadhaar number, in such manner as the Government may, on the recommendations of the Council, specify in the said notification:

Provided that if an Aadhaar number is not assigned to an individual, such individual shall be offered alternate and viable means of identification in such manner as the Government may, on the recommendations of the Council, specify in the said notification.

(6C) On and from the date of notification, every person, other than an individual, shall, in order to be eligible for grant of registration, undergo authentication, or furnish proof of possession of Aadhaar number of the Karta, Managing Director, whole time Director, such number of partners, Members of Managing Committee of Association, Board of Trustees, authorised representative, authorised signatory and such other class of persons, in such manner, as the Government may, on the recommendations of the Council, specify in the said notification:

Provided that where such person or class of persons have not been assigned the Aadhaar Number, such person or class of persons shall be offered alternate and viable means of identification in such manner as the Government may, on the recommendations of the Council, specify in the said notification.

(6D) The provisions of sub-section (6A) or sub-section (6B) or sub-section (6C) shall not apply to such person or class of persons or any State or Union territory or part thereof, as the Government may, on the recommendations of the Council, specify by notification.

Explanation.—For the purposes of this section, the expression “Aadhaar number” shall have the same meaning as assigned to it in clause (a) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.”

3.0 Amendment in CGST Rules for implementation of new sub sections

As discussed in order to implement any Section / Act, the machinery provisions needs to be in place. Accordingly CGST (Third Amendment) Rules, 2020 were issued vide Notification No. 16/2020-Central Tax dated 23-03-2020 whose para 2 , 3 and 4 is in regard to the Aadhaar authentication and reads as under:

2.  In the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the said rules), in rule 8, after sub-rule (4), the following sub-rule shall be inserted, namely:-

“(4A) The applicant shall, while submitting an application under sub-rule (4), with effect from 01.04.2020, undergo authentication of Aadhaar number for grant of registration.”.

In regard to above it is submitted that Rule 8(4) under which new sub-rule (4A) has been inserted as above, deals with electronic submission by applicant of Part B of GST REG-01 viz application for registration.

3. In the said rules, in rule 9, in sub-rule (1), with effect from 01.04.2020, the following subrule (although it is proviso- drafting mistake) shall be inserted, namely:-

 “Provided that where a person, other than those notified under sub-section (6D) of section 25, fails to undergo authentication of Aadhaar number as specified in sub-rule (4A) of rule 8, then the registration shall be granted only after physical verification of the principle place of business in the presence of the said person, not later than sixty days from the date of application, in the manner provided under rule 25 and the provisions of sub-rule (5) shall not be applicable in such cases.”.

Rule 9(1) to which above proviso has been inserted, states that about examination of the application of registration with accompanying documents by proper officer and the same is found in order, approve the grant of registration within 3 working days from date of application. Further sub-rule (5) which is being stated to not be applicable under above newly inserted proviso , states about deemed approval of registration if proper officer fails to take any action within specified period viz within 3 working days of date of submission of application / within 7 working days of furnishing of clarification, information or documents , asked for by proper officer.

4. In the said rules, for rule 25, the following rule shall be substituted, namely:-

“Physical verification of business premises in certain cases.-Where the proper officer is satisfied that the physical verification of the place of business of a person is required due to failure of Aadhaar authentication before the grant of registration, or due to any other reason after the grant of registration, he may get such verification of the place of business, in the presence of the said person, done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the common portal within a period of fifteen working days following the date of such verification.”.

It is important to note here that Rule 25 is not new, rather has been substituted and if we compare the old with new one, we find two new provisions viz that physical verification would be required before grant of registration, in case of failure of Aadhaar authentication and further that verification would be done in presence of applicant.

4.0 Issue of Notifications:

For enabling the implementation of the new sub-section (6B), (6C) and in exercise of powers granted vide sub-section(6D) to Section 25 of the CGST Act,2017, in total three notifications have been issued which are given below:

• Notification No. 17/2020 – Central Tax dated 23rd March, 2020  (effective from 1^st April,2020)

In exercise of the powers conferred by of section 25(6D) of the CGST Act, 2017 , the Central Government, hereby notifies that the provisions of sub-section (6B) or (6C) of the said Act shall not apply to a person who is not a citizen of India or to a class of persons other than the following class of persons, namely (a) Individual; (b) authorised signatory of all types; (c) Managing and Authorised partner; and (d) Karta of an Hindu undivided family.

• Notification No. 18/2020 – Central Tax dated 23rd March, 2020 (effective from 1^st April,2020)

In exercise of the powers conferred by section 25(6B) of the CGST Act, 2017, the Central Government, on the recommendations of the Council, hereby notifies the date of coming into force of this notification as the date, from which an individual shall undergo authentication, of Aadhaar number, as specified in rule 8 of the CGST Rules, 2017, in order to be eligible for registration:

Provided that if Aadhaar number is not assigned to the said individual, he shall be offered alternate and viable means of identification in the manner specified in rule 9 of the said rules.

• Notification No. 19/2020 – Central Tax dated 23rd March, 2020 (effective from 1^st April,2020)

In exercise of the powers conferred by sub-section (6C) of section 25(6C) of the CGST Act, 2017, the Central Government, on the recommendations of the Council, hereby notifies the date of coming into force of this notification as the date, from which the (a) authorised signatory of all types; (b) Managing and Authorised partners of a partnership firm; and (c) Karta of an Hindu undivided family, shall undergo authentication of possession of Aadhaar number, as specified in rule 8 of the CGST Rules, 2017, in order to be eligible for registration under GST:

Provided that if Aadhaar number is not assigned to the said persons, they shall be offered alternate and viable means of identification in the manner specified in rule 9 of the said rules.

5.0 Analysis of the requirement of Aadhaar authentication / physical verification.

After going through the newly inserted sub-sections, newly inserted sub-rules/ substitution of rules and issuance of notification, its time to consolidate these and understand what picture is made when we jointly read them. The sub-section wise analysis is discussed below:

5.1 Aadhaar verification by existing registered persons : Sub-section (6A)

As per said sub-section, every registered person shall undergo authentication, or furnish proof of possession of Aadhaar number, in such form and manner and within such time as may be prescribed. No Rule in regard to implementation of said sub-section has been issued / inserted and thus it can be concluded that as of now there is no requirement for existing registered person to undergo Aadhaar authentication. However their place of business can be verified by proper officer as per Rule 25 of the CGST Rules, 2017 as he is empowered to do so due to any reason even after grant of registration.

5.2 Aadhaar verification by individuals applying for new registration: Sub-section (6B)

According to said sub-section, every individual shall, in order to be eligible for grant of registration, undergo authentication, or furnish proof of possession of Aadhaar number. In this regard as per newly inserted sub-rule“(4A) in Rule 8, the applicant shall, while submitting an application under sub-rule (4), with effect from 01.04.2020, undergo authentication of Aadhaar number for grant of registration.

Similarly Notification No. 18/2020 – CT dated 23rd March, 2020 also states that an individual shall undergo authentication, of Aadhaar number, as specified in rule 8 of the CGST Rules, 2017, in order to be eligible for registration. It further states that in case, Aadhaar number is not assigned to the said individual, he shall be offered alternate and viable means of identification in the manner specified in rule 9 of the CGST rules i.e. registration shall be granted only after physical verification of the principle place of business as per rule 25.

However Aadhaar verification has been exempted in case of any individual who is not a citizen of India (Notification No. 17/2020 – CT dated 23rd March, 2020). 

5.3 Aadhaar verification by persons other than individuals applying for new registration: Sub-section (6C)

As per sub-section (6C) to Section 25 of the CGST Act,2017, every person, other than an individual, shall, in order to be eligible for grant of registration, undergo authentication, or furnish proof of possession of Aadhaar number of the Karta, Managing Director, whole time Director, such number of partners, Members of Managing Committee of Association, Board of Trustees, authorised representative, authorised signatory and such other class of persons.

In this regard Notification No. 19/2020 – CT dated 23rd March, 2020 mandates that w.e.f.01-04-2020 (a) authorised signatory of all types; (b) Managing and Authorised partners of a partnership firm; and (c) Karta of an Hindu undivided family, shall undergo authentication of possession of Aadhaar number, as specified in rule 8 of the CGST Rules, 2017, in order to be eligible for registration under GST.

However in case, Aadhaar number is not assigned to the said persons, they shall be offered alternate and viable means identification in the manner specified in rule 9 of the said rules viz registration shall be granted only after physical verification of the principle place of business as per rule 25.

5.4 Persons exempted from Aadhaar Verification : Sub-section (6D)

As per this sub-section the provisions of sub-section (6A) or (6B) or (6C) shall not apply to such person or class of persons or any State or Union territory or part thereof, as the Government may, on the recommendations of the Council, specify by notification.

Accordingly in exercise of above power, vide Notification No. 17/2020 – Central Tax dated 23rd March,2020 it has been notified that the provisions of sub-section (6B) or (6C) of the said Act shall not apply to a person who is not a citizen of India or to a class of persons other than the following class of persons, namely (a) Individual; (b) authorised signatory of all types; (c) Managing and Authorised partner; and (d) Karta of an Hindu undivided family.

It may be noted here that said notification doesn’t refer to sub-section (6A) as same is not yet effective in absence of rules in regard to implementation thereof.

6.0 Aadhaar authentication / physical verification requirement – at a glance

*Registration is granted within 3 working days of date of submission of application / within 7 working days of furnishing of clarification, information or documents, asked for by proper officer.

** Registration be granted within period of 60 days from date of application.

Frah Saeed

Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.