In April, tax officials disclosed that the detection of Goods and Services Tax (GST) evasion by tax officers almost doubled year-on-year (y-o-y) to over ₹1.01 lakh crore in FY23, of which a recovery of ₹21,000 crore was made by the officers of the Directorate General of GST Intelligence (DGGI).

In FY22, DGGI, the investigative agency under the GST regime detected over ₹54,000 crore and made a tax recovery of over ₹21,000 crore. The total number of GST evasion cases has gone up, with about 14,000 cases detected in FY23, up from 12,574 cases in FY22 and 12,596 cases in FY21.

How does GST evasion happen with fake invoices?

Fake invoice means no real supply of goods or services but simply invoice issuance , which is used for availing input tax credit (ITC) fraudulently. Unscrupulous elements misuse the identity of other persons to obtain fake/ bogus registration under GST, with the intention to defraud the Government.

Such fake/non-genuine registrations are used to fraudulently pass on input tax credit to unscrupulous recipients by issuing invoices without any underlying supply of goods or services or both.

Fake registrations and issuance of bogus invoices for passing of fake ITC has become a serious problem, as fraudulent people engage in dubious and complex transactions, causing revenue loss to the government.

What are the measures through which the government will try to check GST evasion?

A Special All-India Drive has been launched by all Central and State tax administrations from May 16 to July 15, 2023, to detect suspicious/fake GSTINs and conduct requisite verification and further remedial action to weed out fake billers from the GST ecosystem and to safeguard Government revenue.

In the drive, based on detailed data analytics and risk parameters, GSTN will identify fraudulent GSTINs for State and Central Tax authorities.

Details of such identified suspicious GSTINs, jurisdiction-wise, will be shared with the concerned State/Central Tax administration for initiating a verification drive and conducting necessary action subsequently.

If, after detailed verification, it is found that the taxpayer is non-existent and fictitious, the action will be initiated for suspension and cancellation of the taxpayer’s registration

Further, the matter may be examined for blocking of input tax credit in Electronic Credit Ledger. Effort will also be taken to identify the recipients to whom the input tax credit has been passed by such non-existing taxpayers, and to identify the mastermind and take action.

Will there be additional scrutiny on all taxpayers?

No. Pawan Arora, Senior Partner, Athena Law Associates, says genuine taxpayers are not required to panic from this drive as the verification is unlikely to be carried out in the case of such taxpayers

Is there something that taxpayers can do to support the government in checking GST evasion?

The best thing is to ensure compliance. Vivek Jalan, Partner, Tax Connect Advisory, advises genuine taxpayers to keep suitable documents, information, and people at their places of business so that any proceeding of the department can be concluded without any untoward action.

For example, stocks of taxpayers, sales and purchase registers and sign boards should be maintained suitably at each place of business.