Fake GST invoicing on the rise!

Time is such when the government is struggling with low revenue collection due to the COVID-19 Pandemic Virus, cases of fake GST invoicing frauds are hampering the economy to no end.

According to sources in the Finance Ministry, the Directorate General of GST Intelligence (DGGI) & CGST Commissionerate have so far arrested 48 persons including one woman and 3 Chartered Accountants and have booked 648 cases besides identifying 2385 entities in just ten days of the nationwide drive against GST Fake invoicing frauds.

This article is an attempt to make aware the taxpayers of the consequences of “Generating Fake invoices & Indulging in the related frauds”.

Firstly, it is very imperative to know the exact meaning of “Fake Invoice”. When a registered person issues a tax invoice without actual supply of goods or services or payment of GST, such invoices are presumed to be “Fake Invoices”. And this act of the taxpayers would imply “Fake invoicing fraud”.

After the nationwide drive against the GST Fake Invoicing Frauds through which various defaulters came into the eye of GST authorities, the main course observed is that GST Fake invoices are not issued only to pass and avail the Fake input but are also used for nefarious activities leading to tax evasion and massive bank loan fraud.

Two-pronged measures are suggested by the GST Law committee to Curb GST Fake invoicing frauds:
1. New registration applicants in which registration process has to undergo various verification like live photo, use of biometrics, compulsory physical verification and so on. The government may also seek for conditional registration for the applicant those are not trustworthy.

2. Weeding out of existing fake dealers from the systems- The Law Committee also proposed Business Intelligence and Fraud Analytics (BIFA) tool for precise identification of riskier dealers.

There are about 600,000 dormant registrants in GST. About 35,000 such dealers who were given registration in 2018-19 and 2019-20, having annual GST liability of more than INR 50 lakh, 99% of which is paid through ITC have no credential in income tax (did not pay income tax even of Rs 1 lakh in last three years. Since GST fraud has become an increasing problem both in terms of the number of cases reported and the scale for the amount being involved under this.

Hence, control measures are needed to mitigate and minimise fraud that’s why the Government has taken a wonderful step to avoid frauds i.e. implementation of e-invoicing and planning to introduce new returns in the upcoming fiscal that will help in curbing evasion.