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Centre, States Working to Streamline GST Registration Suspension to Check Fake Invoices

Image for representation. (Network18 Creatives)

Image for representation. (Network18 Creatives)

Provisions related to deemed registration under the Goods and Services Tax (GST) law may also be tightened to prevent misuse of such provisions by fake dealers.

Alarmed by a rise in fake invoice cases, the Centre and states on Monday began deliberations to streamline the procedure for suspension of GST registration to make it more efficient and faster to check fraudsters.

The Law Committee of the GST Council, comprising senior central and state tax officers, on Monday discussed the issue of fake invoice frauds, further tightening of the GST registration process and other legal measures, including necessary amendments required in the GST Act, to curb the menace of fake invoicing, a finance ministry source said.

Also, provisions related to deemed registration under the Goods and Services Tax (GST) law may be tightened to prevent misuse of such provisions by fake dealers. Provisions related to suspension of registration may also be streamlined to make the procedure of suspension and cancellation of registration more efficient and faster, so that such fraud operators can be prevented in time from continuing to pass on fake credit down the chain, the source said.

"It is also learnt that data analytics techniques will be used to identify such taxpayers who are suspected to be indulging in fraudulent activities and a coordinated action is likely to be taken against such elements by suspending their registration, followed by detailed physical and financial verification by field officers to check genuineness of their operations, before they are allowed to reuse their registration," the source said.

To work out the detailed modalities for the same, the Law Committee would meet on November 18. The committee would consider the impact of the issuances of fake invoices and strict measures required under the GST law to curb these activities. It would also deliberate on steps required to plug loopholes in the law which are being exploited by the unscrupulous elements to defraud the exchequer. The source said businesses whose owners or promoters do not have commensurate financial track record, like filing of income tax returns, may require detailed physical and financial verification by tax officers before the firms can be considered for GST registration.

"The finance ministry is in the process of plugging these gaps 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," the source added. The GST investigation arm DGGI has arrested 25 persons over the last week for issuing fake invoices.

Major goods involved in these cases included iron and steel articles, copper rod /wires, waste and scrap of non-ferrous metals, plastic granules, PVC resin, readymade garments, gold and silver, construction services, works contract services, agro products, milk products, mobiles, manpower supply services, advertisement and animation services, among others.

Fake invoices are not only used for evading GST and income tax, but also for inflating the expenses to siphon off money from the companies by unscrupulous owners, transferring the money abroad through hawala and bogus or inflated imports and exports. They are also used to obtain higher loans from banks, siphon the loan money and thereby defraud banks and other financial creditors. Fake invoices are also misused by unscrupulous exporters to claim higher GST refund and MEIS incentives which the government has decided to terminate and replace by RoDTEP from January 2021.


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