The Essential Guide to GST Verification

In the realm of business and taxation, GST (Goods and Services Tax) plays a pivotal role. Introduced in India on July 1, 2017, GST unified multiple indirect taxes under a single system, aiming to streamline tax processes and enhance transparency. A crucial aspect of this system is GST verification.

In India, the government assigns a 15-digit unique number known as the GSTIN (GST Identification Number) to businesses, based on their PAN (Permanent Account Number). Businesses often possess multiple GSTINs if they operate in several states or diversify into various activities.

What is GST Verification?

While these regulations aim to simplify the tax system, they have also introduced challenges for businesses, government entities, and financial institutions. These stakeholders must verify the identities of millions to prevent fraud and ensure compliance. GST verification involves confirming the validity of a GSTIN (GST Identification Number) to ensure a business or service provider’s authenticity. This means verifying that the GSTIN listed on an invoice or business portal is correct and corresponds to the vendor you are transacting with. Verification can be done manually via the government’s portal or by using specialized GST verification tools for faster and more comprehensive results.

Why is GST Verification Necessary?

Recent fraud cases in GST verification in India have revealed several significant schemes involving substantial amounts of money and numerous arrests.

Refund Fraud by GST Officials: In Hyderabad, five GST officials were arrested for their involvement in a refund fraud case amounting to approximately ₹46 crore. These officials accepted bribes to process fraudulent GST refunds for bogus electric bike manufacturing units set up with fabricated documents and invoices (CAalley).
Fake Firm Creation: A large-scale operation was uncovered where a mastermind created 115 fake firms to evade GST. This scheme involved the issuance of bogus invoices and fake input tax credit (ITC) claims. Nationwide raids have led to the registration of 793 cases and the recovery of ₹177.50 crore in cash (Hindustan Times).
Multi-Crore Fraud in Noida: Another major fraud case involved a ₹10,000 crore GST scam. The police arrested several individuals, including those who used fake PAN card details to register over 3,000 bogus companies. These companies were then used to generate fraudulent GST claims (Hindustan Times).
Extensive GST Evasion Detected: The Directorate General of GST Intelligence (DGGI) has detected evasion worth ₹18,000 crore through 1,700 fake ITC cases. This crackdown has resulted in the apprehension of numerous fraudsters involved in these illicit activities (Hindustan Times).

A simple and effective way to prevent GST registration frauds early on is by implementing a robust GST verification process. By leveraging the GSTIN (Goods and Services Tax Identification Number), businesses can verify the authenticity of their partners and suppliers. This process involves cross-checking the GSTIN against government databases to confirm the legitimacy of the business entity. Utilizing such verification tools can significantly reduce the risk of fraudulent activities by ensuring that only legitimate businesses are registered and engaged in GST transactions. Additionally, integrating AI and machine learning algorithms can enhance the detection of anomalies and fraudulent patterns, providing an extra layer of security against GST fraud.

GST Verification Process

The GST verification process involves several steps to ensure the legitimacy of a business entity. Here’s a detailed breakdown of the process:

Obtain GSTIN: The first step is to obtain the GST Identification Number (GSTIN) of the business you wish to verify. This is a 15-digit unique code assigned to each GST-registered entity in India.
Access GST Portal: Visit the official GST portal (https://www.gst.gov.in/) where the verification process can be conducted.
Use Search Taxpayer Function: On the GST portal, use the ‘Search Taxpayer’ option available under the ‘Services’ menu. This allows you to search for the details of a taxpayer using their GSTIN or PAN (Permanent Account Number).
Enter GSTIN: Input the GSTIN of the business you want to verify. The system will cross-check the provided GSTIN against its database.
Review Details: The portal will display the details of the business associated with the GSTIN. These details typically include:
- Legal name of the business
- Trade name (if any)
- GST registration status (active or inactive)
- Type of taxpayer (regular, composition, etc.)
- Date of registration
- Address of the principal place of business
- Nature of business activities
Verify Against Documents: Cross-verify the information retrieved from the GST portal with the documents and details provided by the business. Ensure that the business name, address, and other details match with what is on record.
Check Filing Status: You can also check the filing status of the business to see if they are compliant with GST return filings. Regular and timely filings can be an indicator of a legitimate business.

By following these steps, businesses can ensure they are dealing with legitimate entities and reduce the risk of engaging in fraudulent transactions. The GST verification process is crucial for maintaining compliance and safeguarding against fraud.

Importance of GST Verification

Here are some key points highlighting the importance of GST verification:

Prevention of Fraud: GST verification helps identify and eliminate fake or fraudulent businesses that may use bogus GSTINs to evade taxes or claim undue input tax credits. By verifying GSTINs, businesses can ensure they are transacting with legitimate entities, thereby reducing the risk of falling victim to fraud.
Ensuring Compliance: Regular GST verification ensures that businesses remain compliant with GST regulations. It helps verify the GST registration status of suppliers and partners, ensuring that all parties in the supply chain are adhering to tax laws. This compliance is crucial for avoiding penalties and maintaining a good standing with tax authorities.
Enhancing Trust and Transparency: Conducting GST verification fosters trust and transparency in business transactions. It reassures all parties involved that they are dealing with legitimate and compliant businesses, which is essential for long-term business relationships and market reputation.
Accurate ITC Claims: Input Tax Credit (ITC) is a significant aspect of GST, allowing businesses to claim credit for the GST paid on their purchases. Accurate GST verification ensures that the ITC claims are legitimate and based on valid transactions. This accuracy is vital for maintaining the credibility and financial health of a business.
Detection of Tax Evasion: GST verification acts as a deterrent against tax evasion. By verifying GSTINs and monitoring compliance, tax authorities can detect and address instances of tax evasion more effectively. This process helps in broadening the tax base and increasing tax revenue.
Streamlining Audit and Inspection Processes: Verified GST data simplifies audit and inspection processes for tax authorities. It enables efficient tracking of transactions and identification of discrepancies, leading to quicker resolutions and reduced administrative burdens for both businesses and regulators.
Legal and Financial Protection: For businesses, GST verification offers legal and financial protection. It helps avoid entanglements with fraudulent entities that could lead to legal issues or financial losses. By ensuring that all transactions are conducted with verified GST-compliant partners, businesses can safeguard themselves against potential risks.

GST Number Format

The GST Identification Number (GSTIN) is a unique 15-character alphanumeric code that provides key information about a business entity. Here’s a breakdown of its format:

First 2 Digits: State code as per the Indian Census 2011 (e.g., ’27’ for Maharashtra).
Next 10 Characters: The taxpayer’s PAN (Permanent Account Number).
13th Digit: Number of registrations within a state for the same PAN (alphanumeric).
14th Digit: Defaulted to ‘Z’ for all taxpayers.
15th Digit: Check code for error detection (alphanumeric).

Understanding this format helps identify the state of registration, verify the PAN for credibility, and detect possible errors or fraud through mismatches in the segments.

IDcentral GST Verification API

IDcentral provides two GST details search APIs:

Get GSTIN details API using GST number
Get GSTIN details using PAN number

Features

Real-time GSTIN Verification

Verify GSTIN numbers instantly to prevent fraudulent transactions. Get immediate verification results within seconds.

Bulk GSTIN Verification

Save time by verifying up to 10,000 GSTIN numbers in one go with our accurate bulk verification feature.

GSTIN Validation

Ensure the validity of GSTIN numbers by checking their structure, format, and checksum, accepting only valid numbers.

GSTIN Lookup

Retrieve detailed information about a GSTIN number, including the company name, registration date, and address.

GST Returns Verification

Ensure compliance by verifying the GST returns filed by companies. Check the status of GST returns using our API.

Third-Party Integration

Easily integrate our API with third-party applications such as accounting, invoicing, and e-commerce platforms for seamless GST verification.

In conclusion, GST verification is essential for fostering a compliant, transparent, and fraud-free business environment. Utilizing IDcentral’s GST Verification API enhances the accuracy of tax claims, builds trust, and prevents fraudulent activities, benefiting both businesses and tax authorities.