GST evasion. GST fraud: 8,200 cases booked, evasion of ₹62,000 cr detected till date

Central Board of Indirect Taxes & Custom (CBIC) has booked over 8,200 cases involving revenue of over ₹62,000 crore since inception of GST till date. This was the key reason for not changing the threshold related with decriminalisation of offences for fake invoices.

It needs to be noted that there is no term such as fake invoice in GST law.

The GST council on Saturday recommended the raising of minimum threshold of tax amount for launching prosecution under GST to ₹2 crore from ₹1 crore. However, this will not be applicable for the offence of issuance of invoices without supply of goods or services or both.

Limit can be hiked

It may be noted that ₹1 crore is the minimum amount, and the Centre or State can raise the limit. For example, per Section 132 of CGST Act, 2017, issuance of an invoice or bill without supply of goods or services and wrongful availing or utilisation of ITC is a cognisable, non-bailable offence if the amount is over ₹5 crore, and there will be no change in this after the latest recommendation by GST Council.

Vivek Johri, Chairman, Central Board of Excise and Custom (CBIC) admitted that incidence of fake invoice is still high, but the department is making all efforts to check it. Since inception of GST in 2017 and till now, “CBIC has booked over 8,200 cases in matters related with issuance of fake billing or availing input tax credit (ITC) fraudulently through fake invoices. Approximately ₹62,000 crore of revenue is involved in these cases. A total of 1,030 persons have been arrested in these cases,” he said.  Considering these numbers, it was important to not treat fake invoice cases at par with other offences in the process of decriminalisation.

Aim at transparency

A registered assessee is required to Input Tax Credit (ITC) from his gross tax liability and pay the balance in cash to the government which is reflected in overall tax collection. ITC is credit for taxes paid on input. If there is not input , and even then an invoice issued, it results in loss to exchequer. That is why both the Centre and States are designing a special strategy to check the menace with and provide a transparent mechanism for action.

The 3 scenarios

For example, earlier this year CBIC set up a clearer framework in determining demand and penalty with respect to transactions involving fake invoice much more effectively. It prescribed three scenarios and action in each one of them.

In the first — what happens when there is an issuance of tax invoice by one registered person to another without any underlying supply of goods or services? Without supply, no demand for tax and recovery can be made, but the person issuing the invoice would be liable for penal action.

In the second scenario — a registered entity gets a fake invoice without any underlying supply, but gets ITC on the basis of that invoice. In this situation, the said business could be liable for demand and recovery of the said ITC, along with penal action and interest.

The third scenario involves issuance of a fake invoice by one registered entity to another, who further passes on the said ITC to another registered entity. In such a situation, the second entity could be held liable for penal action on two counts – getting ITC fraudulently and issuing fake invoice.

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