GST officers detect over 29,000 bogus firms involved in fake ITC caims of Rs 44,000 cr

Nationwide Operation Against GST Evasion

In a significant nationwide operation, GST officers have identified 29,273 fake firms involved in illicit Input Tax Credit (ITC) claims, totalling a staggering Rs 44,015 crore over eight months until December 2023. This drive against fraudulent registrations has been instrumental in safeguarding government revenue, amounting to Rs 4,646 crore.

Critical Findings in the October-December Quarter

During the crucial October-December quarter, 4,153 bogus firms were detected, suspected of evading around Rs 12,036 crore in taxes. Notably, 2,358 of these firms were uncovered by the Central GST Authorities. In terms of regional distribution, Maharashtra topped the list with 926 fraudulent firms, followed by Rajasthan (507), Delhi (483), and Haryana (424). The vigilant actions during this quarter led to the protection of Rs 1,317 crore in revenue, which included Rs 319 crore that has been realized and Rs 997 crore safeguarded by blocking ITC.

Arrests and Law Enforcement Efforts

The operation led to 41 arrests, with 31 of these being made by Central GST Authorities. Since the start of the special drive against fake registrations in mid-May 2023, there have been 121 arrests. In Maharashtra, tax evasion by 926 bogus firms amounted to Rs 2,201 crore, leading to 11 arrests. Delhi saw 483 bogus firms with a suspected evasion of Rs 3,028 crore, also resulting in 11 arrests. Other states like Andhra Pradesh and Haryana also reported significant numbers of bogus firms and arrests.

Government’s Enhanced Measures Against GST Fraud

  1. Biometric-Based Aadhar Authentication in GST Registration:
    • The government has launched pilot projects in Gujarat, Puducherry, and Andhra Pradesh, incorporating biometric-based Aadhar authentication during the GST registration process.
    • This step aims to ensure the authenticity of entities registering for GST, thereby reducing the chances of fraudulent activities right at the entry point.
  2. Sequential Filing of GST Returns and Reconciliation Measures:
    • The government has mandated the sequential filing of GST returns, ensuring that there are no gaps or inconsistencies in the filing process.
    • System-generated intimations are sent for reconciling any discrepancies in tax liability between GSTR-1 (outward supply) and GSTR-3B (summary of outward supplies and input tax credit).
    • This process helps in identifying mismatches in claimed ITC, based on the data furnished in GSTR-2B (ITC statement) and GSTR-3B returns.
  3. Use of Data Analytics and Risk Parameters:
    • Advanced data analytics tools are being employed to scrutinize and analyze tax return data, helping in the early detection of potential fraud.
    • Risk parameters have been set up to flag high-risk cases and entities that show signs of unusual or suspicious tax credit claims.
    • This technological intervention allows for a more proactive approach in identifying and investigating fraudulent activities.
  4. Increased Scrutiny and Monitoring:
    • There is an intensified scrutiny of high-risk sectors and taxpayers who have a history of non-compliance or suspicious activities.
    • Regular audits and inspections are being conducted to ensure compliance and to detect any discrepancies in real-time.
  5. Strengthening the Legal Framework:
    • Amendments to the GST law and regulations are being proposed to tighten the norms around ITC claims and to penalize fraudulent activities more severely.
    • Legal provisions are being reinforced to enable swifter and more effective action against those involved in GST evasion.
  6. Capacity Building and Awareness Campaigns:
    • The government is conducting workshops and training programs for tax officials to equip them with the necessary skills and knowledge to detect and combat GST fraud.
    • Awareness campaigns for taxpayers are being organized to educate them about compliance requirements and the legal consequences of engaging in fraudulent activities.

Conclusion

The government’s multifaceted approach in tackling GST fraud underscores its commitment to maintaining fiscal integrity and ensuring a fair and transparent tax system. These measures are expected to significantly deter tax evasion and enhance the overall efficiency of the GST framework.

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