Fraudsters’ Mind vs Govt Intelligence for Fake GST Invoices

All over the country, the Directorate General of Goods and Services Tax Intelligence (DGGSTI) in the previous month has arrested 100 persons and recorded 3479 entities inside 1161 cases in the concern of illegally claiming the input tax credit(ITC) through the bogus GST invoices and causes the government tragedy. Despite lower revenue collection.

Latest Update

• The CBIC has shared an infographic presentation on the Twitter website about fraudulent ITC on invoices, View Here
• GST zones and the Directorate General of GST Intelligence (DGGI) have arrested 426 persons including 14 tax professionals for involving fake 8000+ ITC cases approx INR 35,000 crores in FY 2020-21. Read Press Release

What is the Limitation on GST Evasion? Has it Recently Been Raised?

As per the tax officials, the detection of GST evasion by the tax officers would be almost doubled year on year to over Rs 1.01 lakh cr in Financial year 2023 of which the recovery of Rs 21000 cr was made via the officers of the Directorate General of GST Intelligence (DGGI). Under the GST regime DGGI, the investigative agency in FY22 has fetched over Rs 54000 cr and has made a tax recovery of over Rs 21000 cr. there is a rise in the GST evasion cases with 14000 cases fetched in FY23 surging from 12574 cases in FY22 and 12,596 cases in FY21.

In What Way Does the GST Evasion Take Place with the Bogus Invoices?

A fake invoice is one that is issued without any actual provision of goods or services and is used to fraudulently get an input tax credit (ITC). Unscrupulous elements utilize other people’s identities to get false GST registrations in order to cheat the government. These forged/falsified registrations are used to illegally pass on input tax credits to unscrupulous receivers by generating invoices with no underlying supply of goods, or services, or both. Fake registrations and the issue of false invoices for the passage of fake Input tax credits have become a severe problem, since unscrupulous individuals engage in questionable and complex activities, leading the government to lose income.

What Suggests Bogus People Function Fake Invoices?

Bogus invoices are used as it not only assist the theft of GST on taxable output supplies by claiming the excessive ITC and making it into cash, it also aids in enhancing turnover through the fake invoices, enrol the bogus purchase to the theft of the tax, funds diversion along with money laundering. There are around 1602 cases that are enrolled in 2018-19 which are fake ones and it reveals an amount of Rs 11,251 cr and has arrested 154 people. In April and November 2019 the authorities registered 6000 fake cases.

What Explanation is to be Furnished for the Increase in Fake Cases

Due to the lack of consciousness, the tax council noted that it is the major cause for a rise in the companies claiming for the ITC bogus way during the enrollment of GST. The government has built the registration process simpler so that businesses will be easily moved through the process. It implies that the number of fake companies is included to take the GST enrollment in the absence of the investigation of the enrolled address of the company. Also, the lack of exchange of information amid the enforcement bureaus and banks have also directed to a rise in fraud cases. “The existing GST system needs to be more robust to detect such frauds,”

Which Process Is Opting by Fake People to Cheat the Government?

Fakers have seems to run several dummy firms, obtained GST registrations, issued fake GST invoices of goods and services excluding any supply of products, and passes bogus ITC arising from the fake invoices to clients for the commission who used it for the loss of the government as cases listed in the tax department. On December 9, the Vadodara tax unit captured an operation of 206 dummy companies in 10 states which illegally carried an ITC of Rs 154 crore to clients by providing fake invoices of Rs 1,101 crore.

Will Every Taxpayer be Subject to Further Scrutiny?

Since such taxpayers are unlikely to be verified in this operation, there is no need for genuine taxpayers to get alarmed, tax experts mentioned.

Is there Anything Taxpayers May do to help the Government Combat GST Evasion?

The most important thing is to assure compliance. A tax expert urges genuine taxpayers to have appropriate records, information, and people at their places of business so that any departmental case may be completed without any unfavorable action. Stocks of taxpayers, sales and purchase registers, and sign boards should be kept in good condition at each location.

In What the Government Shall Attempt to Verify the GST Evasion?

All Central and State tax administrations launched a Special All-India Drive from May 16 to July 15, 2023, in order to fetch the bogus GSTINs and perform the requisite verification and other remedial action to remove the bogus billers from the GST ecosystem including securing the revenue of the government. GSTN will determine dishonest GSTINs for State and Central Tax authorities during the campaign, based on refined data analytics and risk indicators. Information of such detected suspicious GSTINs jurisdiction-wise, would be communicated with the relevant State/Central Tax administration in order to launch a verification exercise and take appropriate action.

If, after a thorough investigation, it is discovered that the taxpayer is non-existent and false, action will be taken to suspend and terminate the taxpayer’s registration. In addition, the situation may be investigated for blockage of input tax credits in the Electronic Credit Ledger. An effort will also be made to recognize the recipients to whom the ITC has been given through such non-existing assessees, as well as to recognize and prosecute the mastermind.

Will the Tax Council Collect the Given Amount from Fakers?

The tax council who had said this on the condition of knowledge stated that the restoration of money is not like as the money has previously been going through the process and the companies concerned in the fraud are exclusively on paper who had no fixed assets.

What Measures the Government is Adopting to Control Fake Cases?

The GST registrations are going to be strict and legal measures are needed to be taken care of to deal with the increasing bogus cases. The GST enrollment method has opted out other legal actions contesting necessary law amendments required in the GST Act.

Myths v. Facts GST Fake Invoice Frauds