Government ropes in I-T department to crack down on GST fraud

News: Government has roped in the Income Tax Department to tap illicit incomes as part of a crackdown against fraud companies rigging the Goods and Services Tax (GST) regime.

Facts:

• How did fraudsters cheat the Government? They have floated multiple dummy firms, obtained GST registrations, issued fake GST invoices without actual supply of services and passed on ineligible Input Tax Credit(ITC) accrued from the bogus invoices to clients for a commission who subsequently used it to make GST payments causing losses to the government.
• Reason for these frauds:
  • Lack of due diligence during the GST registration: The process of registration was made easy and hassle-free by the government so that businesses could be easily on-boarded to the system. However, this meant that a number of dummy companies too obtained the GST registration in the absence of scrutiny or physical verification of the registered address of the companies.
  • Lack of data exchange among the enforcement agencies and banks have also led to increase in fraud cases.
• What action has the government taken on this?
  • Government has said that any income traceable to the use of fake bills and other GST frauds shall be considered concealed income and will attract severe penalties.
  • Government has also tightened the GST registration process and legal measures to deal with the rising cases of fake invoicing.

Article source