GST fake invoice menace: CBIC issues SOPs for tax officers

The Central Board of Indirect Taxes & Customs (CBIC) has come out with Standard Operating Procedure (SOP) ‘instructions’ to be followed by tax officers while carrying out the physical verification of entities that have been granted a deemed GST registration sans Aadhaar authentication.

This is part of its strategy to counter GST fake invoice frauds via search and survey, leading to arrests and booking of cases against fake entities involved in availing and passing on input tax credit (ITC) fraudulently.

Sources said that this SOP would effectively curb the fake invoices menace and ITC frauds, ensuring at the same time proper facilitation of ease of doing business for genuine applicants/entities without any overreach. This move is a follow-up of the high-level review meeting that was held by the Department of Revenue recently.

Meanwhile, according to Directorate General of GST Intelligence (DGGI) sources, the DGGI and CGST Commissionerates have so far arrested 92 persons for availing or passing ineligible ITC fraudulently through fake invoices, and have booked 994 cases against more than 3,161 fake GSTIN entities identified across the country during its nationwide drive launched in the second week of November.

Verification of registration

CBIC sources in the know of the matter said that an entity having deemed registration where the applicant either has not opted for Aadhaar authentication, or where such authentication has failed, has to go for mandatory physical verification of the premises. In cases where physical verification is difficult, certain additional documents may be called for verification by the tax officer (upon approval of an officer not below the rank of Joint Commissioner) before deciding upon grant of registration.

According to sources, the Board in an ‘instruction’ to its field formations has said that registrations granted sans Aadhaar authentication during the period from August 21, 2020 to November 16, 2020 on deemed basis require verifications to ascertain that they have genuine business or intends to carry out so. All such deemed registrations would be subjected to compulsory post registration verification and the list of such deemed registrations would be circulated zone wise to field formations for confirmation, which has to be completed in a time-bound manner within three weeks, and a weekly status report has to be submitted to the Board.

Sources said that pending the physical verification, a notice in FORM REG-17 may be issued in specific cases by the proper officer on certain risk parameters, seeking explanation from the registered person regarding the differences and anomalies noticed, if any, where FORM GSTR-1 is filed and FORM GSTR-3B is not filed either for the August or September, 2020 tax period — and where the difference in tax amount, as reported in FORM GSTR-1 and FORM GSTR-3B, is more than ₹1 lakh (R1>R3B).

On receipt of the reply to the notice, the proper officer would complete the proceedings as per the CGST Rules. Also, in the interest of revenue, the tax officer in addition to the physical verification may further carry out preliminary financial verification of the registrants by seeking certain documents.