Government to filter firms for input tax credit fraud

After launching a nationwide drive towards pretend Good and Services Tax (GST) invoices that noticed 25 arrests in simply 4 days, the Centre is contemplating to amend legal guidelines to examine fraudulent claims of enter tax credit score (ITC) via bogus payments, a finance ministry official mentioned.

“An urgent meeting of the Law Committee of the GST Council is being convened on Wednesday [November 18] on this matter that will further tighten the GST registration process,” the official mentioned requesting anonymity. The latest crackdown towards individuals indulging in creating pretend payments by the Directorate General of GST Intelligence (DGGI) resulted within the arrest of 25 individuals. The company has additionally recognized about 1,180 entities and booked 350 instances towards unscrupulous parts concerned in availing and passing on of ineligible enter tax credit score (ITC) fraudulently, he mentioned. The crackdown that was carried out between November 9-13 was resumed after the Diwali holidays, he added.

Fake invoices had been additionally used as a conduit for actions resulting in tax evasion, huge financial institution mortgage fraud, cash laundering and hawala transactions, he mentioned. “These activities have been largely carried out by non-existent or fly-by-night firms and by using a network of firms game the system to usurp ITC on commission basis,” he added.

“The Law Committee would do some out-of-the-box thinking on this issue as at present the only way to curb this illegal activity is to identify the chain of entities involved in issuance of fake invoices and availment of credit and take strict action against them for preventing such fraud, including arresting the masterminds,” he mentioned.

The Union finance ministry is within the strategy of plugging these gaps within the GST registration course of to make sure that solely real companies get a GST registration and people who intend to defraud the system, are filtered out throughout registration itself, the official added.