Finance Ministry on Sunday reported that over 29,000 fake firms were identified and over 44000 crores of GST tax evasion detected in a nationwide drive over 7 ½ months.

The Ministry disclosed the results of a special drive to identify non-existent/bogus registrations and issue fake invoices without any underlying supply of goods and services. The drive started in mid-May last year. “A total of 29,273 bogus firms involved in suspected ITC evasion of ₹44,015 crore have been detected. This has saved ₹4,646 crore of which ₹3,802 crore is by blocking of ITC and ₹844 crore is by way of recovery. So far, 121 arrests have been made in the cases,” a finance ministry statement said.

All Central and State tax administrations launched a special All-India Drive on May 16, 2023, to detect suspicious/fake GSTINs, conduct requisite verification, and take further remedial action to weed out fake billers from the GST ecosystem and safeguard government revenue. Based on detailed data analytics and risk parameters, GSTN identified fraudulent GSTINs for State and Central Tax authorities in the drive.

It was planned that details of such identified suspicious GSTINs, jurisdiction-wise, would be shared with the concerned State/Central Tax administration to initiate a verification drive and conduct necessary action. If, after detailed verification, it is found that the taxpayer is non-existent and fictitious, action will be initiated for suspension and cancellation of the taxpayer’s registration. Further, the matter may be examined for blocking the input tax credit in the Electronic Credit Ledger. Efforts will also be taken to identify the recipients to whom such non-existing taxpayers have passed the input tax credit and to identify the mastermind and act.

The statement further added that in the quarter ending December, over 4,000 bogus firms that involved suspected ITC evasion of around ₹12,000 crore were detected. The Government has taken various measures to strengthen the GST registration process. Pilot projects of biometric-based Aadhar authentication at registration have been launched in the States of Gujarat, Puducherry, and Andhra Pradesh.

Besides, the Government has moved to curtail evasion of tax through measures such as sequential filing of GST returns, system-generated intimation for reconciliation of the gap in tax liability in GSTR-1 & GSTR- 3B returns and the gap between ITC available as per GSTR-2B & ITC availed in GSTR-3B returns, use of data analytics and risk parameters for detection of fake ITC, etc., the statement added.

Fake invoice means no real supply of goods or services but simply invoice issuance, which is used fraudulently to avail input tax credit (ITC). Unscrupulous elements misuse the identity of other persons to obtain fake/ bogus registration under GST to defraud the Government. Such fake/non-genuine registrations are used to fraudulently pass on input tax credits 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 off fake ITC have become a serious problem, as fraudulent people engage in dubious and complex transactions, causing revenue loss to the Government.