The guidelines for the special all-India drive against the bogus GST registrations would have been issued by the Central Board of Indirect Taxes and Customs (CBIC). The department has released all details via Instruction No. 01/2023-GST and updated Instruction No. 02/2024-GST.
What is a Special All-India Drive Against Fake GST Registrations?
The Central Board of Indirect Taxes and Customs (CBIC) has noticed some malpractices are happening creating fake GST registrations (GSTINs). Fraudsters do this using the PAN and Aadhaar numbers of other people. Usually, they target persons from economically weaker sections and don’t let them know what they are going to do with their PAN and Aadhaar details.
In some instances, counterfeit paperwork—such as forged rent agreements, property tax receipts, and electricity bills is used as evidence of the primary place of business to acquire a false GST registration. This is being done to defraud the government exchequer by passing fake input tax credits without an underlying supply of goods or services
The GST Revenue Department has collaborated with the GSTN (Goods and Services Tax Network) to eradicate the presence of counterfeit GSTINs (Goods and Services Tax Identification Numbers). To achieve this, the GSTN has employed advanced artificial intelligence, state-of-the-art data analytics, and risk assessment criteria to accurately identify fraudulent GSTINs.
Additionally, field formations have the authority to contribute to this initiative by conducting their independent data analysis. They can utilise various analytical tools such as BIFA, ADVAIT, NIC Prime, E-Way Analytics, and others. Furthermore, they can leverage human intelligence, the Aadhaar database, local insights, past detection experiences, alerts on modus operandi, and additional sources of information.
To support their efforts, field formations may receive supplementary communication from the GSTN, providing specific guidance on utilising the BIFA tools effectively during this campaign.
Remarkably, within the initial week of the first move, more than 10,000 fraudulent GSTINs were successfully detected throughout India. This accomplishment underscores the efficacy of the artificial intelligence system employed by the GSTN.
Time Period of Special All-India GST Drive
The first phase of a special all-India drive was conducted from 16 May to 15 July 2023, and the second phase is scheduled from 16 August to 15 October 2024 by central and state tax administrations. It was recently initiated to identify dubious or bogus GSTINs, conduct necessary verification, and take additional measures to eliminate these fraudulent billers from the GST ecosystem and protect government GST revenue.
GSTN shall find out the bogus GSTINs for the state and central tax authorities as per the detailed data analytics and risk. GSTN shall furnish the information of the detected dubious GST Identification Number (GSTINs), jurisdiction-wise, with the concerned state or central tax administration (through DGARM in the case of central tax authorities) for executing the verification drives and operating the required action.
“Successful implementation of the Special Drive would require close coordination amongst the state tax administrations and between the state and central tax administrations. For this purpose, a nodal officer shall be appointed immediately by each of the zonal CGST zones and states to ensure seamless flow of data and coordination with GSTN, DGARM, and other tax administrations,” the CBIC stated.
The reports obtained from distinct formations shall get compiled by the GST Council secretariat and then make available to the National Coordination Committee. The unique procedure fetched at the time of the special drive shall comply via the GST Council Secretariat and shown to the National Coordination Committee, which shall nextly be shared with the administrations of the central and state tax all over the country.
Observing & Supervising Under Special All-India GST Drive
A dedicated National Coordination Committee, led by a Member of the Central Board of Indirect Taxes and Customs (CBIC), consistently oversees the progress of the nationwide initiative in India. The committee comprises Principal Commissioners, Chief Commissioners, and Commissioners of State Tax from CGST Zones in Delhi, Bhopal, Gujarat, West Bengal, and Telangana. This vigilant monitoring ensures the effectiveness of the campaign and enables swift intervention if necessary
Action Undertaken by GST Officers
Upon receiving data from the Goods and Services Tax Network (GSTN) or the Directorate General of Anti-Profiteering (DGARM) via the Nodal Officer, the respective jurisdictional tax officer(s) will undertake a time-bound process of verifying GSTINs. If, after thorough verification, it is determined that a taxpayer is fictitious and does not exist, the tax officer may take immediate action to suspend and cancel the taxpayer’s registration under Section 29 of the Central Goods and Services Tax (CGST) Act and its corresponding rules.
Furthermore, the information provided in form GSTR-1 by the aforementioned taxpayer may be utilised to identify the beneficiaries who have wrongfully received input tax credits from such non-existent taxpayers.
Appropriate measures will be taken to recover the input tax credit wrongly claimed by recipients based on invoices issued by non-existent suppliers, without any actual supply of goods, services, or both, if the recipient’s GSTIN falls under the jurisdiction of the concerned tax authority.
In cases where the recipient’s GSTIN belongs to a different tax jurisdiction, the relevant case details and supporting documents will be expeditiously transmitted to the respective tax authority using the format outlined in Annexure-B of Instruction No. 1, through the Nodal Officer.
Read Also: Complete Information Related to Bogus Invoicing Under GST
In order to identify the culprits or beneficiaries involved in fictitious GSTINs, efforts will be made to collect unpaid taxes and/or provisionally attach properties, bank accounts, etc., under Section 83 of the CGST Act. Similarly, appropriate action will be initiated or undertaken concerning any suspicious GSTINs discovered during the investigation or verification process.
Special All-India GST Drive Benefits for Taxpayers
While this initiative may create apprehension among taxpayers, it is important to note that honest and law-abiding taxpayers need not worry when they receive a notice for GST verification. Instead, they should diligently prepare the required documents for verification and cooperate with the GST officer.
The successful completion of this drive, which aims to eliminate fake GSTINs from the GST system, will ultimately benefit sincere taxpayers by ensuring a fair business environment. This will help reduce unfair competition and safeguard their interests. Furthermore, by eradicating fraudulent GSTINs from the market, taxpayers will be encouraged to conduct business with genuine suppliers, discouraging any association with fake GSTINs.
Points to Remember for Taxpayers
- The taxpayer should keep in mind that the purpose of the drive is to identify GSTINs, and the officer does not have any special authority to enter business locations without the Joint Commissioner’s prior consent.
- The taxpayer should be aware that the officer cannot broaden the purview of the verification visit beyond the verification of company premises to include problems such as categorization, GST rates, etc., or to conduct an inspection, search, or reconcile the credit in GSTR 3B v. GSTR 2A/2B.
The taxpayer must also make sure that the following illustrative papers are available in case a GST officer visits and publicly display the GST Registration Certificate at their business premises in order to assist in easier verification:
- If the property is owned or rented, you will need to provide proof of ownership or a rental agreement.
- the most recent electric bill for the business location.
- income from property taxes
- Aadhar Cards and PAN Cards are examples of KYC documents.
- Account information
- As required by GST, books of accounts are kept on-site at the location of business.
Genuine and honest taxpayers who receive a notice for GST verification need not overly concern themselves. Instead, it is crucial for businesses to ensure their preparedness by having the necessary documentation readily available for inspection and by displaying cooperative behaviour during interactions with the visiting GST officer.
The Revenue Department has done a remarkable job through the drive as it has already detected 10,000+ fake GSTINs within 1 week. Artificial Intelligence and Data Analytics techniques are used by the National Coordination Committee to monitor and supervise the suspicious GSTINs.
It is expected that there are huge numbers of suspicious GSTINs yet to be identified and removed from the GST ecosystem by the Revenue. This drive will surely reduce the number of fake GSTINs and establish improved compliance and increase the GST revenue down the line.