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Fake invoice: DGGI arrests 25 persons, new GST registration process being tightened

·3-min read

New Delhi, Nov 15 (PTI) GST investigation arm DGGI has arrested 25 persons over the last week for issuing fake invoices for goods like waste and scrap of non-ferrous metals, readymade garments, gold, silver and construction services, a source said.

The Directorate General of GST Intelligence (DGGI) has registered about 350 cases for issuing fake invoices against 1,180 entities, and search and investigation are on to apprehend other persons involved in the racket and also the beneficiaries who used the fake invoices to evade goods and services tax (GST), Income Tax, and do money laundering.

'Major goods involved in these cases are MS/SS scrap, articles of iron & steel, copper rod/wire, waste & scrap of non-ferrous metals, plastic granules, PVC resin, readymade garments, gold and silver, construction services, works contract services, agro products, milk products, mobile, manpower supply services, advertisement and animation services, etc,' a source said.

Considering the menace of fake invoices and hawala racket, and their damaging impact on the stability of the economy, the procedure for new GST registration is also being tightened.

Businesses, whose owners or promoters do not have commensurate income tax payment records, will require physical and financial verification before their companies can be given GST registration, the source added.

'It is also being examined whether apart from taking action against the beneficiaries under GST laws, Income Tax Act, and Prevention of Money Laundering Act, issuers of fake invoices as well as beneficiaries of such invoices can be detained under Conservation of Foreign Exchange and Prevention of Smuggling Activities (COFEPOSA) Act,' the source said.

The DGGI in the second week of November upped its actions on evaders as part of its nationwide drive to catch those availing and passing on input tax credit (ITC) fraudulently through fake invoices, non-existent or fly-by-night firms and circular trading.

'The drive against GST evaders and ITC fraudsters is expected to further intensify in days to come and many more arrests will be done. The cases would also be investigated against the beneficiaries by the Enforcement Directorate for money laundering,' the source added.

The drive was intensified post a high-level meeting in the Department of Revenue earlier this month.

The meeting, held via video conferencing, was attended by all senior officials of DGGI, GST, GSTN, Enforcement Directorate, Central Board of Indirect Taxes and Customs (CBIC) and Central Board of Direct Taxes (CBDT) along with their Chairmen besides the Principal Chief Commissioners/Chief Commissioners of Central GST zones across the country.

DGGI and its zonal units also sensitised the head of field formations on the future course of action and the framework of the crackdown, the source added.

To intensify the drive which started on November 9, 2020, a plan was chalked out whereby Directorate General of Analytics and Risk Management (DGARM), DGGI, and CBDT were to collate data against the suspected entities indulging in fake invoice racket.

This data was then shared with the zonal units of DGGI and the Principal Chief Commissioners/Chief Commissioners of the CGST Zones.

The field formations of DGGI and CGST Zones have formed strike force for verifying and taking necessary action and book cases relating to fake invoices, while Directorate General of Revenue Intelligence (DGRI) was roped in for examining the cases involving fraudulent exports using fake invoices in coordination with DGGI, the source added.

Following the crackdown on fake GST invoice frauds, DGGI and CGST formations have so far acted in Delhi, Bengaluru, Mumbai, Ludhiana, Chennai, Nagpur, Kolkata, Gurugram, Ahmedabad, Surat, Vadodara, Bhilai, Jodhpur, Hyderabad, Mathura, Raipur, Visakhapatnam, Jamshedpur, Patna, Imphal, Meerut, Guwahati, Pune, Siliguri, Bhopal, Bhubaneshwar, among others.

It may be noted that fake invoices are not only used for evading GST and income tax but also for inflating expenses to siphon off money from 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, siphoning the loan money, making the account non-performing asset, and thereby defrauding banks and other financial creditors.

Fake invoices are also misused by unscrupulous exporters to claim higher GST refund and MEIS incentives. PTI JD ANZ RVK