Fake ITC cases, trade fraud, fraudulent refunds under GST to be investigated by IT dept

Strap: Centre, States frame strategy to end GST woes

The Centre and States have joined hands to formulate a nine-point strategy to streamline the Goods & Services Tax (GST) and plug revenue leakage. These include linking foreign exchange remittances with IGST refund for risky and new exporters, investigation of fraudulent ITC cases by the IT department, a single bank account for foreign remittance receipt, and refund disbursement, beside others.

These measures are being formulated at a time when the overall GST collection has been below expectations. Though GST collection in December crossed Rs 1 lakh crore , there are apprehensions of a shortfall in the yearly collection. The average monthly collection during the first nine months of the current fiscal year was approximately Rs 1 lakh crore, In December, the Finance Ministry set its GST tax collection target at Rs 4.45 lakh crore for the remaining period of this financial year 2019-20, while targeting Rs. 1.1 lakh crore per month in January and February, with Rs 1.25 lakh crore for March.

After brainstorming sessions, it was decided to constitute a Committee of Centre and State officers to examine and implement quick measures in a given time frame to curb fraudulent refund claims, including the inverted tax structure refund claims, and GST evasion. The Committee will come out with a detailed SoP (Standard Operating Procedure) within a week, which may be implemented across the country by January-end.

Considering the fraudulent IGST refund claims being made, linking foreign exchange remittances with IGST refund for risky and new exporters was explored. All major cases of fake Input Tax Credit, export/ import fraud and fraudulent refunds will also be compulsorily investigated by the investigation wing of the Income Tax Department.

Access to banking transactions, including bank account details by the GST system, in consultation with RBI and NPCI, was also explored. Aligning the GST system with the FIU (Financial Intelligence Unit) for the purpose of getting bank account details and transactions and PAN-based banking transactions, was also considered.

Sharing data of cases involving evasion, and fraudulent refund detected by CBIC with CBDT and vice-versa, so that fraudsters could be properly profiled was also taken up. Provision of a single bank account for foreign remittance receipt and refund disbursement was also explored. A self-assessment declaration will be prescribed with suitable amendments in GSTR Forms in case of closure of businesses. The Centre and states have agreed to undertake verification of unmatched Input Tax Credit availed by taxpayers.

Various presentations were made in the conference, notably, by Commissioner (Investigation); CBIC presented an overview of fake/fraudulent ITC; DG, DRI presented few novel cases unearthed by them, including a case having pan-India operation and methodology to curb misuse of refund of ITC/IGST; DG, ARM presented the use of data analytics, artificial intelligence and machine learning for early identification of fraudulent practices needing enforcement action, to bring a focused approach to the evaders without bringing inconvenience to the genuine taxpayers.

This was the second all-India Conference where both tax administrations came together formally to build synergies and share their knowledge and best practices with the intent of bringing about uniformity in the tax administrations. Primarily, the conference deliberated on a mechanism and machinery for disseminating inter-departmental data among various agencies, including the GSTC, CBDT, CBIC, FIU, DoR, DGGI and State Tax Administrations, in order to achieve efficiency in curbing evasion and augment revenue collection.

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