• Notification Date: 11-05-2023
• Notification No: N/A

Govt to launch Special 2-month Nationwide Drive against GST Frauds

The government will launch a two-month special drive starting May 16 against unscrupulous elements – individuals, professionals and firms – usurping input tax credit under the Goods and Services Tax (GST) regime through fake identity and forged documents without supplying products for real. 

A directive to this effect was circulated on Thursday to all field formations with adequate safeguards and elaborate standard operating procedure (SOP) to plug revenue leakages without any outreach, one finance ministry official said requesting anonymity. 

“A special all-India drive may be launched by all central and state tax administrations during the period 16th May 2023 to 15th July 2023 to detect suspicious/fake GSTINs [GST identification number] and to conduct requisite verification and further remedial action to weed out these fake billers from the GST eco-system and to safeguard government revenue,” said one of such circulars reviewed by HT. 

The drive has been launched close on the heels of a similar measure taken by the finance ministry to hold professionals responsible for their clients. The government made changes in the Prevention of Money Laundering Act (PMLA) to include chartered accountants, company secretaries, and similar professionals carrying out financial transactions on behalf of their clients. They will now be treated as reporting agencies like banks as per the PMLA. 

The official mentioned above said unscrupulous elements were found obtaining fake registrations using forged documents - electricity bills, property tax receipts, rent agreements etc - as proof of principal place of business. 

As an example, he cited a recent case detected by the Gujarat tax authorities, where some fraudsters obtained fake GST registrations on the basis of PAN (permanent account number) and Aadhaar numbers of persons from economically weaker sections without their knowledge. They modified their phone numbers and Aadhaar details fraudulently at the local Aadhaar Seva Centre by giving them cash under the guise of some government scheme. 

“In a meeting of central and state tax authorities, it was decided to launch a concerted and coordinated action on a mission mode across the country in a more systematic manner to nab such elements,” the official said. 

Based on the detailed data analytics and risk parameters, the tax authorities will pinpoint such unscrupulous elements across their jurisdictions. “The tax authorities will also use their own analytical tools, human intelligence and Aadhaar database to catch the culprits,” he said. Authorities will share information across jurisdictions, he added. 

Various actions, including blocking of input tax credit (ITC) in electronic credit ledger as per the provisions of law would take place against the culprits without any delay, he said. 

A National Coordination Committee will monitor the entire drive. It will be headed by member, GST at the Central Board of Indirect Taxes and Customs (CBIC), which will include senior officials from the central and state governments. The GST Council Secretariat will act as the secretariat of the committee, he said. 

“The special drive against fake registration undertaken by the CBIC would likely help in curbing tax evasion,” said Saurabh Agarwal, Tax Partner, EY. He added that it will also help central and state administrations to share the information with each other, which would further help in better tax administration. “Though the impact of such drive on GST collections would be seen after next few months,” he added. 

CA Aniket Sunil Talati, president of the Institute of Chartered Accountants of India: “ICAI will conduct an awareness programme for its members in relation to such financial transactions which are already prohibited on behalf of one’s client, in the course of his or her profession”. He added that ICAI will also continue to work with the authorities and other regulators so that these changes are implemented in the right perspective and the role of professionals is understood.