Fraudulent GST Registrations
The Central Board of Indirect Taxes and Customs (CBIC) has announced that tax officials will initiate a two-month special campaign targeting fraudulent GST registrations starting on August 16, 2024.
Following the identification of nearly 22,000 fraudulent registrations linked to an estimated GST evasion exceeding Rs 24,000 crore during the inaugural campaign in May of the previous year, the National Coordination Committee, which includes senior tax officials from both the central and state levels, has resolved to commence a second special initiative aimed at “cleaning up the tax base.”
During this special campaign, the GST Network, in collaboration with the Directorate General of Analytics and Risk Management (DGARM) under the CBIC, will pinpoint suspicious or high-risk GSTINs through comprehensive data analysis and risk assessment parameters. This information will then be forwarded to the relevant jurisdictional tax officer for further investigation.
The officers from both the Centre and State GST departments will conduct a verification process within a specified timeframe for the GST identification numbers (GSTINs) that are deemed suspicious. Should it be determined that a GSTIN is either fictitious or does not exist, the tax officer will proceed with actions to suspend and cancel the registration, as well as to block any input tax credit (ITC).
This initiative aims to identify suspicious or fraudulent GSTINs, carry out necessary verifications, and implement corrective measures to eliminate these fraudulent billers from the GST ecosystem, thereby protecting government revenue.
Under the GST framework, certain entities obtain fraudulent registrations to illegitimately claim ITC by generating false invoices.
The CBIC also asked field offices to take steps to identify the masterminds/ beneficiaries behind such fake GSTIN for further action, wherever required, and also for recovery of government dues and/ or provisional attachment of property/ bank accounts, etc.
Tax officers will have to mention in the action taken report if he/she detects any novel modus operandi during the verification/ investigation.
The distinctive approach identified during this special initiative will be compiled by the GST Council Secretariat and subsequently disseminated to Central and State Tax administrations throughout the nation, as stated.
During the initial drive conducted from May 16, 2023, to July 15, 2023, aimed at identifying fraudulent registrations, a total of 21,791 entities were found to be non-existent. This figure includes 11,392 entities associated with state tax jurisdiction and 10,399 entities linked to CBIC jurisdiction, all of which held GST registrations.
The special drive uncovered an estimated tax evasion amounting to Rs 24,010 crore, which comprises Rs 8,805 crore attributed to state taxes and Rs 15,205 crore attributed to central taxes.
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