Obtaining a Goods and Services Tax (GST) registration is supposed to be free. In practice, it is anything but free.
Across several North Indian states, a genuine taxpayer may spend anywhere between ₹5,000 and ₹30,000 merely to obtain a GST registration. This is not the statutory fee. It is the market price of navigating a process in which a clarificatory notice has become almost routine.
Applicants are asked to produce documents that are not prescribed: the Aadhaar card of a witness to a rent agreement, additional ownership records, photographs of the proprietor standing outside the business premises, a photograph of the signboard or fresh geo-tagged photographs. Even after these documents are submitted, the application may be rejected, requiring the taxpayer to begin again.
The problem is not new or unknown. In April 2025, CBIC itself acknowledged that officers were seeking avoidable clarifications and additional documents not prescribed in the registration form, resulting in delays and rejection of genuine applications. It issued Instruction No. 03/2025-GST to standardise the process. Yet, instructions alone cannot resolve a problem arising from the basic design of registration.
The simplified route has not solved the problem
The 56th GST Council meeting recommended an optional simplified registration scheme. Operationalised from 1st November 2025, it provides for electronic registration within three working days for low-risk applicants and taxpayers whose monthly output tax liability on supplies to registered persons does not exceed ₹2.5 lakh.
The reform was well-intentioned. The Government estimated that nearly 96 per cent of new applicants could benefit from it. However, the scheme has an inherent limitation. A growing business cannot predict with certainty that its B2B tax liability will remain within the prescribed limit. Businesses also do not want to shift registration routes as soon as they grow. Consequently, many applicants continue to prefer regular registration, where the old problems remain.
The scheme also introduces a structural risk. At an average GST rate of around 15%, a large base of taxpayers with turnover up to ₹2 crore (passing input tax credit (ITC) of ₹30 lakh) are now unverified and may pass fake ITC. In effect, while easing compliance for genuine businesses, the design may inadvertently increase exposure to fake ITC.
We need to understand the purpose of a GST registration and what we want to verify. GST registration is nothing, but an identity established under the statute of law, unlike PAN or AADHAAR, this is powerful since it gives the taxpayer an opportunity to pass input tax credit. Thus, creating a liability on the Government and an asset for the recipient. Therefore, we need to be sure that this power is vested with existing, functional and bonafide businesses.
GST registration is fundamentally a KYT exercise
Banks undertake Know Your Customer (KYC) checks. Telecom companies verify a subscriber before issuing a SIM card. GST is similar and needs a robust Know your Taxpayer (KYT) check. The government can be brutal about it, verifying to depths, like a forensic audit, but it should be a simple, one-time, welcoming process.
This is also closely linked to ease of doing business in India. We often hear about one-day shop setup in countries like China and Vietnam. We can achieve a similar outcome by making the process so simple that a GST registration can be applied for through an app, provided all required documents are ready.
The government must establish three basic facts: First, do the applicant and the declared place of business exist? Second, is the applicant connected with the declared place of business? Third, can the applicant and the premises be traced if the business defaults or is found to be fraudulent?
None of these questions requires a tax officer to examine every registration application personally. Nor should we pretend that tax administrations have enough officers to physically verify every new business (tax inspector level vacancy across jurisdictions is as high as 50%). Our limited field resources should be used for intelligence-driven and risk-based verification, not routine document collection. The answer lies in outsourcing the physical verification process.
Learn from telecom
A telecom subscriber can complete verification through a structured process involving identity authentication, live photographs and digital records. The process is quick because the physical collection of information has been separated from the final decision to activate the connection. GST registration can follow a similar model.
Once an application is initiated, an authorised agent can visit the declared place of business and create a standard digital KYT docket. The agent can:
- Authenticate the proprietor, partner, director or authorised signatory.
- Verify Aadhaar and other prescribed identity documents.
- Capture time-stamped and geo-tagged photographs of the premises.
- Photograph the applicant or authorised representative at the premises.
- Capture the signboard and basic indicators of business activity.
- Scan the ownership document, rent agreement, consent letter or utility bill; and
- Record any other information specifically prescribed in a standard checklist.
The entire verification can be completed at the applicant’s premises. A digital docket containing authenticated documents, photographs, location coordinates and the agent’s certification can then be transmitted directly to the GST system.
A transparent fee of ₹999 or ₹1,999 may be prescribed for this service. Genuine taxpayers will readily pay such a fee if it gives them certainty, speed and freedom from repeated notices. It would replace an opaque cost of ₹5,000–₹30,000 with a uniform and accountable service fee.
The officer should decide and not collect documents
Outsourcing KYT does not mean outsourcing the sovereign function of granting registration. The final decision must remain with the tax officer.
However, once a complete and independently verified KYT docket is received, registration should ordinarily be granted automatically. Rejection should be permitted only where there is adverse intelligence, a mismatch in authenticated information, a previous history of fraudulent registration or another reason recorded in writing.
Enhanced officer-based verification can remain for high-risk cases. For example, businesses expected to pass on ITC beyond a prescribed threshold (Say 1 Crore) or applicants linked to cancelled or fraudulent entities or first-time refund applicants may undergo physical verification by a tax officer.
This would create a sensible two-tier system: routine applications would undergo outsourced KYT, while scarce departmental resources would be reserved for cases presenting a genuine revenue risk.
Outsource the process, retain the accountability.
GST registration is the first interaction between a new business and the tax administration. Today, that interaction often tells a small business, a young founder or a multinational company (MNC) that a GST registration requires professional expenditure, repeated explanations and an uncertain outcome. That is contrary to the purpose of GST and to the government’s objective of improving ease of doing business.
India does not need another complicated registration reform. It needs to recognise that registration is primarily an identity and premises verification exercise. The technology already exists. The private sector capacity already exists. Tax officers can continue to exercise statutory control while an outsourced private network performs the standardised physical process.
Sometimes, the most important tax reform is not a change in the rate or the law. It is simply making it easier for an honest taxpayer to enter the system.
The author, Siddharth Jain, is a former IRS officer, and a member in the GST launch team. The views expressed are personal.
