Cases of GST frauds and false invoicing are terribly hitting the society leading to a disturbed GST structure. One such instance recently popped up in the markets of Ludhiana where unscrupulous dealers were found under-invoicing the trade of bicycles leading to tax evasion. Ludhiana is the hub for manufacturing cycles and cycle parts leading a large mass involved in the bicycle trade.
Quoting an example of GST evasion one Ludhiana based bicycle trader said that a bicycle priced at Rs. 2,500 was being invoiced at Rs. 900 by some unscrupulous dealers leading to evasion of GST. By false-invoicing, some traders are brushing away the tax of Rs. 192 against the tax of Rs. 300 (applicable GST on Rs. 2,500) on each bicycle they sell.
Adding to his speech he said that some unscrupulous dealers are bagging the sales of ordinary bicycles at Rs. 2,200 to Rs. 2,250 per unit on which they are grabbing the profit of Rs. 400 per unit.
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The situation is troublesome for most organized bicycle manufacturers as they are losing their existing market due to “widespread malpractices of underlying invoicing”. Indicating towards the threat to honest tax-compliant bicycle dealers he said that illegal dealers through false-billing will disturb the whole bicycle value chain including some scrap-based steel suppliers and some front end dealers.
These malpractices are not only affecting the government treasury but also distorting the well-structured manufacturing and trade system while causing a threat to fair competition.
Bicycle manufacturers further stressed the fact that the bicycle is the sector prone to tax evasion pointing out that more than 70% of the 20 million bicycle units sold yearly are below Rs. 5,000 with very less profit margins. Reported that last months GST authorities raided several dealers supposedly involved in malpractices related to billing of bicycles.
