Over ₹50,000-crore fake input tax credit detected in 18 months

Shishir Sinha | Updated on: May 16, 2022
Vivek Johri, Chairman of the Central Board of Indirect Taxes & Custom (CBIC)

Vivek Johri, Chairman of the Central Board of Indirect Taxes & Custom (CBIC) | Photo Credit: cueapi

More than 20,000 fake GSTNs, too, identified; CBIC chairman says ₹2,400 crore recovered through special drive

The Centre, with support from States, has managed to detect fake Input Tax Credit (ITC) amounting to over ₹50,000 crore in a period of 18 months. However, the recovery has been much less and experts have called for more such initiatives to check fake invoices.

Vivek Johri, Chairman of the Central Board of Indirect Taxes & Custom (CBIC), said the special drive, which commenced in November 2020 along with States, has so far resulted in the booking of more than 6,700 cases and arrests of over 650 persons. More than 20,000 fake GSTNs have been unearthed and over ₹50,000 crore fake ITC detected.

“We have recovered over ₹2,400 crore through this drive and attempts are on to improve recovery,” he said while talking to people from industries. As per Section 132 of the 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 and non-bailable offence, if the amount is over ₹5 crore.

‘More initiatives needed’

Though experts acknowledge the success achieved so far, through the special drive, they suggest further initiatives. MS Mani, Partner with Deloitte India, said several businesses that take input tax credits based on their vendors’ invoices have already put in place stringent tax processes to weed out suspicious vendors. This will need to become a way of life for all businesses in order to end the menace of fake invoices. “In addition, there would be increased scrutiny on invoices issued to related parties,” he said.

Prateek Bansal, Associate Partner (Tax and Custom) with White and Brief, a law firm, called for a multi-pronged strategy. There is a mechanism of physical scrutiny/verification of all premises and business activities of a company/firm by GST authorities before granting registration. Now, the system may be devised where the concerned jurisdictional officer should also be held accountable, in the event the said registered entity is found to be non-existing or engaged in fake invoicing without actual supply/receipt of goods/services, he said.

“Quarterly verification and mapping of various GST related documents/procedures (returns, invoices, e-Way bills, exports, etc.) in the capacity of system-generated short-listed taxpayers should be undertaken by jurisdictional GST authorities to ensure there is no leakage of revenue,” he suggested.

Tanushree Roy, Director — Indirect Tax, Nangia Andersen LLP, said it is equally important to identify users of fake invoices, and this can be done by examining unusual ITC utilisation (say, above 95 per cent). In addition, sectors historically prone to tax evasion should also be investigated. Additionally, it may also be required to keep a database of offenses committed by entities involved in fake invoicing. “Blocking ITC of entities issuing fake invoices, as well as their users would also help deter the issuance of fake invoices. In case any entity has availed ITC basis fake invoices, adequate recovery proceedings should be put in place for recovery,” she said.

Published on May 16, 2022
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