• Notification Date: 23-06-2023
• Notification No: N/A

Small Metal, Packaging Sector in focus for Fake Invoicing under GST

The small metal and packaging sectors have come under radar of goods and services tax (GST) authorities for fake invoicing. As such, the government is mulling a clean-up of registered entities by working on parameters to red flag the risky ones. These entities would will have to undergo mandatory physical verification, a senior government official reported. 

“In the small metal and packaging industry, the credit chain deniability is very high. It's impossible to track these. We need to check if physical infrastructure is there. We need to list areas where physical verification will be mandated. The parameters will be provided online and show physical verification after registration,” the official said. 

For existing registrations in these sectors, cleaning of operations will look at performance parameters and then take a decision, they added. 

Fake invoicing means invoices are issued even when there is no real supply of goods or services. The invoices are then used to avail input tax credit (ITC). Fraud elements even obtain fake registrations under GST to obtain ITC, which causes revenue loss to the government. 

“We will have to clean up the registration database. Essentially, we will have to decide the parameters based on which physical verification will be done. Parameters will be applied online and then we will go ahead. We will take small units and do a dry run to see if it's effective,” he said. 

The government is working on putting together best practices to maintain the fine line between enforcement and ease of doing business. In the application database, the government intends to ensure easier verification. 

“The parameters will be industry specific, location specific. Certain industries are not possible in certain areas. The government is currently debating how to apply this. It is a nuanced thought process,” the official said. 

However, the government is looking at effectively using data analytics so that physical verification can be minimised. But wherever the checks are not there, physical verification will be needed, he added. 

Increasing cases of fake ITC are being detected in various sectors. The government has been aiming to minimise fake invoicing which are issued many a times by dummy companies registered under GST.