Central GST Authority has tracked fake invoices amounting to ₹63,000 crore in three year period starting August 2020. However, it managed to collect only about ₹3,000 crore.

Meanwhile, the two-month joint special drive by Centre and State GST authorities, starting May 16, found more than 12,500 fake GST numbers to date, Vivek Johri, Chairman of Central Board of Indirect Taxes and Customs (CBIC) has said. Now, GST Council, in its next meeting on July 11, will decide about the future of this drive.

Talking about the lower recovery under central drive, Johri said, “Recoveries are difficult because they’re fake. Recoveries are time-consuming and slow as we have to identify the beneficiary. So far, we have recovered ₹3,000 cr.” Fake/non-genuine registrations are being used to fraudulently pass on input tax credits to unscrupulous recipients by issuing invoices without any underlying supply of goods or services or both and causing revenue loss to the government.

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Giving details about the drive, jointly operated by Centre and States, Chairman said that about 60,000 entities were found risky. Out of this, verification for about 50,000 was completed and among them “almost 25 per cent (about 12,500) has turned out to be fake,” he said. When asked about specific locations and sectors, he said that there are certain locations where it is rampant. Delhi-Haryana-Rajasthan is one belt. Then, suspicious entities were also found in certain parts of Gujarat, Noida, Kolkata, Assam, Telangana, Tamil Nadu, and Maharashtra.

“It is spread out. But yes, if you are to do an analysis of whether you find more fake entities in certain locations, these would be locations where you find more fake entities vis-a-vis other places. Sectors are mainly metal or plastic scrap and waste paper. We are also finding that it is being generated for services. So manpower services, advertising services have instances of fake billing,” he said without giving details about amount involved in all these cases as it is still computed.

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Talking about modus operandi, Johri said they are doing it in two ways - either they steal the identity of the person without knowing it or PAN/Aadhaar and take registration without knowing to steal it from them. Then, they start looking for buyers for that firm or they start generating fake invoices at a commission. The other modus operandi is that they induce people by paying a small amount and make them part with their identity document and then create bogus firm.

Earlier, when these fake entities were actually generating invoices, the department managed to catch them. Now technology has made work easier, Johri said, “We have very advanced analytics. We watch the behaviour of new entrants. We look into their IT history whether they have any history of past payments. There are certain addresses which over a period of time we have come to know that they are used for generating fake firms. So based on analytics, we are able to identify.”

On more punitive action the tax authority is considering, Johri said as of date, there is no proposal to make any change. Focus is more on preventive than punitive action, he said.