Under the Goods and Services Tax (GST) regime, fake invoicing has become a rampant problem. Many businesses are issuing fake invoices to evade taxes, which is a significant threat to the GST system. The government has taken several steps to curb this practice and has introduced demand and penalty provisions under GST to deal with fake invoicing.
Fake invoicing refers to the practice of issuing invoices for goods or services that have not been supplied or received. It is a form of tax evasion, where businesses claim input tax credit (ITC) on the fake invoices, which they can use to offset their GST liability. This practice results in significant revenue losses for the government.
According to the Central Board of Indirect Taxes and Customs (CBIC), fake invoicing is the biggest challenge faced by the GST system. It estimates that the government has lost around INR 45,000 crore due to fake invoicing in the financial year 2019-20.
To tackle fake invoicing, the government has introduced demand and penalty provisions under GST. These provisions empower the tax authorities to demand additional tax from the businesses that have issued or received fake invoices.
The demand provision under GST empowers the tax authorities to demand additional tax from the businesses that have issued or received fake invoices. The demand can be raised within five years from the date of issuance of the fake invoice. The businesses that have claimed ITC on the fake invoice will have to pay back the amount along with interest.
The penalty provision under GST imposes heavy penalties on the businesses that have issued or received fake invoices. The penalty can be up to 100% of the tax amount involved in the fake invoice. In case the tax amount involved is not quantifiable, the penalty can be up to INR 10,000. The penalty can be reduced to 15% if the taxpayer pays the penalty within 30 days of receiving the penalty order.
The demand and penalty provisions under GST have had a significant impact on businesses. They have become more cautious while issuing and receiving invoices to avoid any penalty or demand from the tax authorities. The provisions have also helped in curbing the practice of fake invoicing to some extent, as businesses are aware of the severe consequences of being caught.
However, some businesses have raised concerns that the provisions are too harsh and can be misused by the tax authorities. They fear that the tax authorities may use these provisions to harass genuine taxpayers and demand additional tax or penalty unnecessarily. The government has assured that there will be no harassment of genuine taxpayers and that the provisions will be used to target only those businesses that are involved in fake invoicing.
Fake invoicing is a severe problem under the GST system, and it is essential to take strict measures to tackle it. The demand and penalty provisions under GST are significant steps taken by the government to deal with fake invoicing. The provisions have had a positive impact on businesses, and they have become more cautious while issuing and receiving invoices. However, it is also necessary to ensure that the provisions are not misused by the tax authorities and that genuine taxpayers are not harassed.
Reversal of Input Tax Credit in GSTR 2 : All You Need to Know
Mechanical Wood Pulp - GST Rates HSN Code 4701
Section 194A of the income tax act