New Delhi: The government has convened an urgent meeting of the GST Law Committee on Wednesday to discuss the ways to tackle the menace of fake GST invoices. These measures will include making the process of GST registration difficult so that only genuine businesses can get a GST number while the suspension of GST registration will be made faster and efficient in case of misuse or tax evasion, which will be done by amending the law, ETV Bharat has learnt.
The Committee is also expected to discuss some out-of-the-box ideas to purge the fraudsters at the stage of GST registration application itself to keep the GST system clean, a source told ETV Bharat.
The GST Council’s Law Committee would consider the impact of the issuances of fake invoices and strict measures required under the GST law to curb these activities.
Sources in the ministry said the meeting was part of a nationwide drive against the GST fake invoice frauds.
The Directorate General of GST Intelligence (DGGI) has arrested 25 persons including two professionals in the four-day-long nationwide drive that was conducted from November 9 to November 12.
Also read: Fictitious Input Tax Credit: Directorate General of GST Intelligence arrests four
Officials said the nationwide drive would resume after the Deepawali recess.
“Fake invoices have not only been issued for availing or passing on of the ITC but were also used as a conduit for nefarious activities leading to tax evasion, massive bank loan fraud, money laundering and Hawala transactions,” a finance ministry source told ETV Bharat while explaining the urgency of the issue.
“This has a very serious impact on the economy in the long run,” said the official.
Officials said these activities have been largely carried out by non-existent or fly-by-night firms as these entities game the system to usurp ITC on commission basis by creating a web of companies.
Officials said these firms were misusing the business-friendly measures implemented by the government such as easy and quick GST registration, liberal GST return filing norms among others.
Nipping in the bud
According to the official sources, the GST Law Panel would discuss the measures that are required to plug loopholes in the law which are being exploited by the unscrupulous elements to defraud the exchequer.
“We are in the process of plugging the loopholes in the GST registration process to ensure that only genuine businesses get a GST registration and those, who have intent to defraud the system, are purged out at the registration stage itself,” officials said.
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According to a source, the businesses, whose owners or promoters do not have a commensurate financial track record, like filing of income tax returns and payment of income tax to the Government, may require detailed physical and financial verification by tax officers, before their companies can be considered for GST registration.
The provisions related to deemed registration under GST law may also be tightened to prevent misuse of such provisions by fake dealers.
The government will also streamline the process to suspend the GST registration. It will be made more efficient and faster.
Tax officials will also use data analytics techniques to identify such taxpayers, who are suspected to be indulging in fraudulent activities and a coordinated action is likely to be taken against them.
These measures will include faster suspension of their GST registration, which will be followed by detailed physical and financial verification by field officers to check the genuineness of their operations, before they are allowed to reuse their registration.
