Targeting Tax Fraud: The Two-Month Special Drive Against Fake GST Registrations

The Indian government has launched a nationwide special drive. Both the central and state tax administrations have launched this special nationwide drive to identify the suspicious or fake GSTINs (Goods and Services Taxpayer Identification Number) from May 16, 2023, to July 15, 2023, to take actions against these fake billers, take strict measures against them, and ensure to safeguard the government's revenue.

Central Board of Indirect Taxes & Customs (CBIC) said in an instruction to all of its field formation “A Special All-India Drive may be launched by all Central and State tax administrations from May 16, 2023, to July 15, 2023, to detect suspicious/fake GSTINs and to conduct requisite verification and further remedial action to weed out these fake billers from the GST ecosystem and to safeguard Government revenue,”.

Currently there are 1.39 crore of registered taxpayers which is double the number registered taxpayers compared to previous tax regime. They’re pre GST or Central Excise VAT regime.

The following is the most concerning aspect of tax evasion: According to the official GST evasion found this year in FY23, it is nearly ₹1.01 crore, which is double the previous year. In FY22, the identified evasion was around ₹54000 crores, of which ₹21000 crores were recovered by the DGGI (Directorate General of GST Intelligence), while in FY23, only ₹21000 crores were recovered out of 1.01 lakh crores.

The worst case scenario is here: the overall number of GST (Goods and Services Tax) evasion instances detected in FY23 has risen to 14000, up from 12574 in FY22 and 12596 in FY21. As a result, there has been a dramatic increase in evasion cases, and the GST evasion amount has also been increased.

Central Board of Indirect Taxes & Customs (CBIC) said as an instruction “Action may also be taken to identify the masterminds/beneficiaries behind such fake GSTIN for further action, where ever required, and also for recovery of Government dues and/or provisional attachment of property/bank accounts,”

The government has committed to putting an end to this fraudulent activity by the fake tax payers. So it has adopted strict measures against them. Tax officers are verifying the suspicious GSTINs and thoroughly cancelling the registration of fake taxpayers. And also blocking the ITC (input tax credits) obtained by these fake registered taxpayers.

For identifying these fake GSTINs, the government is seamlessly utilizing detailed data analytics along with risk parameters. And also using tools like BIFA, ADVIT, and NIC Prime to catch these scammers.

They are coordinating thoroughly with the central and state tax authorities to enhance the effectiveness of this special drive against tax evasion by registered fake taxpayers.

To provide additional support for this special drive, the government has also appointed several nodal officers in each of the CGST zones and states. These officers play a crucial role in facilitating the proper flow of information to GSTN & DGARM.

FAQs

What is the special drive against fake GST registration?

The GST department is conducting a special drive to counter fake GST registrations. GST officers will verify GST numbers using different methods, including visiting registered business premises to ensure genuine operations and the presence of valid proprietors, partners, or directors.

Will 100% of the GST numbers be verified?

The GST system, using detailed data analytics and risk parameters, identifies suspicious GST numbers. The list of such numbers will be shared with the central and state tax authorities for verification. Additionally, GST officers may supplement this list based on their own analysis, human intelligence, local knowledge, and past experience.

What precautions need to be taken?

If your business is legitimate and you have not engaged in any transactions with fictitious parties, there is no need to worry. However, it is advisable to display your GST registration certificate, business name, and GST number at your registered place of business. While the primary focus of the drive is not on checking compliance with these requirements, non-compliance may result in penalties during a GST officer's visit. Ensure that you have all the necessary KYC documents for the proprietor/partners/directors and registered address.

What if the GST number is registered at a residential place?

There is no provision in the GST law prohibiting GST registration at a residential place. If your business can be operated from your residence, it is permissible. Service providers, small traders, and small manufacturers can conduct business from their residences.

What if multiple GST registrations are obtained at one place?

The GST law does not impose restrictions on having multiple GST registrations at one place. However, it is important to avoid situations where numerous companies are registered in a single location, as this may raise doubts regarding the genuineness of business operations.

What will happen to fake registrations?

Under Section 29 of the CGST Act, 2017, GST officers have the authority to suspend and cancel GST registrations found to be fraudulent. Furthermore, by analysing the details provided in GSTR-1 by these fake registrants, other beneficiaries of the fraud will be identified, and appropriate action will be taken, including blocking input tax credit and levying penalties.