The GST Intelligence has spotted yet another case of fraud related to the utilization and passing on of ineligible Input Tax Credit (ITC), with bogus invoices. The GST officials have arrested three persons involved in massive frauds involving GST amounting to over Rs 2350 crores, said a statement by the Ministry of Finance. The official found that Sachin Bhoruka, Director/Partner in various firms such as Erman Metals, Pioneer Trading, Marshal Multiventures, etc, was arrested for availing ITC amounting to Rs 485.64 crore and passing on fictitious Input Tax Credit amounting to Rs 485.55 crore. Thus, the total quantum of the fraud committed involved GST amounting to Rs 971.19 crores.

In a parallel investigation, another person Mahesh Kinger, authorised aignatory of Blue Sea Commodities and Director of Theme Lights was also found engaged in the fraudulent availment and utilization, as well as passing on of ineligible ITC on the basis of bogus invoices issued and received without actual supply of any goods or services. These entities had availed ineligible ITC amounting to Rs 580.23 Crores and had passed on ineligible ITC amounting to Rs 579.76 crores. The total quantum of the fraud committed involved a GST of nearly Rs 1,159.99 crores.

Further, the GST officers arrested Deepak Kumar Prajapati, Director of Udyog Kiran Ltd due to a similar fraud. The subsequent investigations revealed that Prajapati had set up an intricate web of over 22 firms that indulged in circular trading for the purpose of artificially inflating their turnover so as to avail higher bank loans and credit facilities.

The state governments of West Bengal and Kerala, which have been at loggerheads with the Centre over how to compensate the states for their GST revenue shortfall in FY21, given the paucity of the designated cess funds, also have accepted Option-1 mooted by the latter to meet the shortfall.

With this, 25 states and all three UTs with legislature — Delhi, J&K and Puducherry — have come to accept the Option-1.

Under the mechanism, the Centre envisages to borrow a total of Rs 1.1 lakh crore via a special RBI window and transfer the funds to states as back-to-back loans sans any consequent fiscal impact on states.

Between them, West Bengal and Kerala will get Rs 10,197 crore under the special window. Further, the Centre has granted additional borrowing permission of Rs 4,522 crore to Kerala (0.5% of GSDP) and Rs 6,787 crore to West Bengal. The nod for additional borrowings is meant to be an incentive for states choosing the special window.

The Goods and Services Tax Council will soon consider comprehensive changes to the registration process for new applicants which will make the process stringent for those not opting for the Aadhaar-based authentication, government sources said. The new regulations are aimed at curbing fly-by-night operators who use fake invoices to avail input tax credit (ITC).

The law committee of the GST Council that met last week has submitted its recommendation on both fresh registrations and on weeding out existing risky taxpayers that are more likely to be involved in the scam. Sources said that suggestion are based on need to curb fake invoice menace while retaining simple compliance norms under GST.

Existing registrants can be suspended on displaying risky behaviour, including non-filing of return for six months, high proportion of tax payment through ITC and suspicious income-tax profile, sources said. Currently, around 6 lakh GST taxpayers are dormant, and about 35,000 other assessees with more than Rs 50 lakh yearly tax liability have paid as much as 99% of tax through ITC. These taxpayers have also paid less than Rs 1 lakh income tax in the last three years.

Central and state tax officials have suggested the option of online GST registration with live photo and use of biometrics to weed out the menace of fake firms claiming input tax credit, sources said. The GST Council’s law committee, which comprises central and state tax officials, has also suggested that a fresh registrant must go for compulsory physical verification and personal identification in case opting for non-Aadhaar authentication based registration process and he or she does not have income-tax return supported adequate financial capability.

Finance ministry sources said the law committee has suggested that new or fresh registration in GST may adopt Aadhaar like registration process under which new registration can be done online with live photo and use of biometrics with due verification of documents.

Such facilities can be provided at banks, post offices and GST Seva Kendras (GSKs). The GSKs can work on the pattern of Passport Seva Kendras to provide new registration facilities with required checks on fake registration, a source said.

An overhaul of the goods and services tax (GST) registration process and suspension of the registration of businesses identified as risky are among the proposals of a panel of officials attached to the GST Council.

The proposals by the law committee of the GST Council, comprising central and state officials who advise its ministerial members, aim to tighten compliance measures and target restrictions on firms identified as risky, without affecting the ease of doing business in general, said a finance ministry official.

The recommendations include the use of Aadhaar or Aadhaar-like biometric identification for new registrations, steps to identify businesses that pose a risk of revenue loss to the exchequer, use of income tax returns to verify the credentials of entrepreneurs seeking GST registration, and restriction on using tax credits from the purchase of raw materials to meet the final tax liability.

As the government steps up its offensive against fake invoice rackets, it has started asking taxpayers to explain various aspects of voluntary tax payments made since the goods and services tax (GST) was launched. This has upset the assessees who are dealing with the fallout of the pandemic.

Under GST, a taxpayer can discharge any outstanding tax liability through a form called DRC-03. This is used by taxpayers to address short tax payment or for discharging liabilities in response to show cause notices from the department.

The GST administration is required to acknowledge such payments soon after it is made but many assessees told FE that they are getting notices since August even though the department never followed up due procedure after DRC-03 payments were made.

Micro-enterprises will soon begin to feel the heat of the government’s tax enforcement drive, with key compliance measures now covering larger businesses becoming applicable to them over the next few months.

From December, firms with sales below rs5 crore—defined as micro firms—will not be able to generate an electronic permit (e-way bill) for goods transportation if they have defaulted on filing return forms for two consecutive tax periods.

The National Informatics Centre, which runs the portal for generating e-way bills, said it will activate this feature for all firms from 1 December irrespective of their turnover. From 15 October, this compliance rule has been applicable for bigger businesses.

The Centre and states are looking to further tighten the GST registration process and legal measures to deal with the rising cases of fake invoicing.

A meeting of the law committee of the GST Council has been convened on Wednesday to discuss these issues, finance ministry sources said.

The committee, comprising senior central and state tax officers, would also discuss the GST fake invoice frauds, further tightening of the GST registration process and work out other legal measures including necessary law amendment required in the GST Act to curb the menace of fake invoicing, they added.

Also the provisions related to deemed registration under Goods and Services Tax (GST) law may be tightened to prevent the misuse of such provisions by fake dealers and the provisions related to suspension of registration may also be streamlined to make the procedure of suspension and cancellation of registration more efficient and faster, so that such fraud operators can be prevented in time from continuing to pass on fake credit down the chain.

In terms of Rule 138E (a) and (b) of the CGST Rules, 2017, the E-Way Bill (EWB) generation facility of a taxpayer is liable to be restricted, in case the taxpayer fails to file their FORM GSTR-3B returns / Statement in FORM GST CMP-08, for tax periods of two or more.
From 1st December, 2020, onwards, the blocking of EWB generation facility would be made applicable to all the taxpayers (irrespective of their Aggregate Annual Turnover (AATO)) In terms of Rule 138 E (a) and (b) of the CGST Rules, 2017, on the EWB Portal.
Thus, on 1st December 2020, the System will check the status of returns filed in Form GSTR-3B or the statements filed in Form GST CMP-08, for the class of taxpayers to whom it applies, and restrict the generation of EWB in case of:
Non filing of two or more returns in Form GSTR-3B for the months up to October, 2020; and
Non filing of 02 or more statements in Form GST CMP-08 for the quarters up to July to September, 2020

From 1-1-2021, Government has mandated e-invoicing for the taxpayers with aggregate turnover exceeding Rs. 100 Cr. (in any preceding financial year from 2017-18 onwards).
To view the updates on e-invoice – enablement, testing, help options & resources, please CLICK HERE.

After a nationwide drive against fake invoices that tend to mar the Goods and Services Tax (GST) system, the government is examining if the offenders can be booked under COFEPOSA (Conservation of Foreign Exchange and Prevention of Smuggling Activities Act), apart from taking action against them under GST laws, Income Tax Act and Prevention of Money Laundering Act, sources said.

The government is also examining whether businesses whose owners or promoters do not have commensurate income tax payment records may require physical and financial verification before their companies can be allowed GST registration

The GST intelligence directorate has arrested a Maharashtra lawmaker’s (MLA) son for issuing fake invoices worth Rs 520 crore of input tax credit (ITC), sources in the tax department said. The arrest was part of a pan-India drive undertaken by the indirect tax department’s intelligence wing.
Sunil Gutte, son of MLA Ratnakar Gutte, was arrested along with his associate after it was found that the firm in which he is a director had been engaged in availing `304 crore worth of ITC fraudulently while also passing Rs 216 crore worth of ITC to other multiple entities. The ITC was availed based on fake invoices without actual supply or receipt of goods and services.

“It appears the main objective was to inflate the turnover of his firm artificially, and obtain enhanced credit limit from the bank,” an official said.
About two year ago, Gutte’s brother, a movie director, was also arrested for availing fraudulent IGST refunds. “Their father who owned a sugar mill was also booked by Maharashtra police and enforcement directorate for allegedly availing loans worth Rs 328 crore from six banks, using names of 2,298 farmers, some of whom were dead, from some villages in Parbhani district,” another official said.
Separately, the central GST commissionerate in South Delhi busted a syndicate of firms involved in availing invoices and e-way bills issued on the GST identification numbers of fake firms and obtaining IGST refunds on these documents.

GSTN has earlier introduced Form GSTR-2B, a static statement with details of ITC available for a tax period, for the benefit of taxpayers. GSTR-2B is an auto-drafted Input Tax Credit (ITC) statement generated for every recipient, on the basis of the information furnished by their suppliers, in their respective Form GSTR-1 & 5 and Form GSTR-6 filed by ISD.
GSTN has also introduced a facility to download pdf statement to taxpayers, who are filing monthly GSTR-1 statement, with system computed values of Table 3 of Form GSTR-3B. This PDF will be prepared on the basis of the values reported by them, in their GSTR-1 statement, for the said tax period.

Businesses that are on the tax authorities' radar for Goods and Services tax (GST) evasion will be automatically blocked from issuing electronic invoices when they attempt suspicious transactions.

The tax department is using data mining and artificial intelligence to identify potentially fraudulent invoices and shell companies, according to a Mint report. The move is aimed at curbing tax invasion and improving the efficiency of the indirect tax system.

Moneycontrol could not independently verify the story.

"Now what will happen is that our intervention can also happen almost on a real-time basis. With data analytics, we can identify and block such entities from issuing electronic invoices so that they aren't able to damage the system. While deterring fraudulent elements, this also provides greater simplicity and convenience to honest taxpayers," an official told Mint.
GST e-invoicing is mandatory from October 1 for companies with an annual turnover of above Rs 500 crore.
The GST Network (GSTN) on November 8 introduced auto-populated or pre-filled tax forms, which will make the filing process easier.

The Rs.2.35 lakh crore estimated shortfall in Goods and Services Tax (GST) collections in 2020-21 is expected to shrink by almost 15% with revenue seeing positive growth since September and the momentum expected to continue in the remaining five months of the financial year, two finance ministry officials said.

Overall GST collections that saw their positive growth (this financial year) of 4% in September, after having plunged by 72% in March, posted a year-on-year growth of over 10% in October, when they crossed Rs.1.05 lakh crore. The October number added to the raft of good news about the economy, including car sales and a strong Purchase Manager’s Index score, an indication of a pick up in manufacturing activity.

Besides positive GST collections since September, the number of states having a year-on-year decline in revenue has reduced from 15 in September to seven in October, the officials added on condition of anonymity. “The trend, if sustained in the next five months, will reduce the gap between projected revenue and actual revenue for FY-21 by about Rs.35,000 crore,” one of the officials said.

According to official data, 15 regions that saw a fall in revenue in September 2020 compared to the same month last year included Chandigarh (10% drop in GST revenue), Delhi (7%), Sikkim (49%), Arunachal Pradesh (20%), Manipur (19%), Mizoram (42%), Tripura (3%), Meghalaya (6%), Daman and Diu (83%), Karnataka (5%), Goa (23%), Lakshadweep (58%), Puducherry (1%), and Telangana (2%).

GST Network’s infrastructure has been upgraded to handle up to 3 lakh logged-in users at a time, GSTN said on Sunday.
Besides, the Goods and Services Tax Network (GSTN) has introduced auto-populated sales return form GSTR-3B in PDF form which will be available from October 2020 tax periods onwards.

The complete PDF with auto-population of input tax credit will be available on the common portal (GSTN) from November 12, 2020, GSTN said in a statement.
GSTN said it has augmented the capacity of the gateway from 1.5 lakh to 3 lakh concurrent logged in taxpayers to handle the expected sharp surge in the indirect tax-related activities on the portal after easing of lockdown.
Further, the upgrade has enabled GSTN to handle and scale up to 5 lakhs concurrently logged-in taxpayers, if necessary, it added.
The number of active taxpayer numbers have effectively doubled since the launch of GST at about 1.3 crore.

As per GSTN data, September 2020 witnessed a sudden jump in filing of GSTR-3B, the monthly return filed by normal taxpayers.
This surge was also due to the backlog in filing of previous months’ returns for which relaxations were provided to taxpayers in view of the COVID-19 outbreak.
The subsequent month also saw increased traffic which was successfully handled by the GST portal, it said.
GSTN said detailed breakup of various tables of GSTR-1 (supply return) and GSTR-3B which have been used to auto-populate GSTR-3B have also been provided in the PDF.
In the first phase, system has started auto-populating details from GSTR-1 to GSTR-3B from July 2020 period onwards for all GSTR-1s filed after August 27, 2020, GSTN added.
“All taxpayers are requested to go through their GSTR-3B (PDF) and provide feedback (if any) on any aspect by raising a ticket on the self-service portal,” GSTN said.

The monthly GST returns (GSTR-3B) in October saw a 36% jump compared with corresponding period a year ago as the collections grew by over 10% in the month, and breached the Rs 1-lakh-crore mark for the first time in the current fiscal, government data showed.
GST Network (GSTN) saw an even bigger surge in return-filing in September as the extended deadlines for previous months came to a close. Over 1.68 crore returns were filed in September, an increase of more than 88% over last year.

Over 1.3 crore taxpayers are registered with GST but about 17 lakh are composition taxpayers which are required to file a separate quarterly return while the rest file GSTR-3B monthly.
“It has been made possible as the GST infrastructure has been upgraded to handle up to 3 lakh concurrent logged-in users at a time,” the government said referring to the increased load on the GSTN system. The system is also capable to handling 5 lakh concurrent users if required, it said.
GSTN’s capacity was enhanced from 1.5 lakh concurrent users in June in anticipation of a surge of tax returns owing to the pandemic and subsequent deferrals in the original deadlines.

Aiming to collect almost the same sum as taxes as last year, the revenue department is tightening compliance requirements related to e-invoicing. The buyers are required to ensure proper e-invoices are issued to them by listed large GST-registered businesses; in the absence of such e-invoices, the buyers could lose input tax credit.

A list released by the department includes over 28,000 GST identification numbers that must only issue e-invoice for B2B sale of items. The rule came into effect from October 1 for firms with more than Rs 500-crore turnover.

invoicing system is connected to a central portal which receives and validates invoices in real time. It has been touted as a game changer, and one of the reasons why the proposed overhaul of GST return-filing system was abandoned earlier this year as it was thought that e-invoicing could achieve the same objective without unsettling the current system.

“Every business entity procuring supplies from large vendors must ensure that invoice issued to him is a valid e-invoice with an invoice reference number (IRN). Taxpayers need to doubly ensure that supplies received from the listed vendors must be backed by a valid e-invoice,” Rajat Mohan, senior partner at AMRG & Associates, said.

Many companies that reported an increase in their indirect tax outgo due to a steep jump in their import costs after the Covid pandemic fear that when things go back to normal, they could face intense scrutiny from the taxman.

This is mainly because the Goods and Services Tax (GST) is pegged to the cost of the goods imported.

In most cases, the costs of the importers have gone up by anywhere around 10 per cent to 20 per cent.

People in the know say that when the cost of goods imported jump by 10 per cent so does the GST levied on that.

Many fear that when the situation goes back to normal indirect tax officials could still challenge the valuation of the goods imported—as in most cases there are no verifiable benchmark for prices of most imports.

In most cases the steep jump in the costs is due to the disruption in global supply chains, say industry trackers.

The government will use artificial intelligence (AI) and Aadhaar registration to segregate dubious firms purposely created for Goods and Services Tax (GST) evasion and put them under the “risky” category to closely monitor their activities, two finance ministry officials said.


The customs department has already created a database of “risky” exporters who fraudulently availed input tax credit (ITC) and nabbed several firms, including star exporters. Now the same mechanism could be used for fake firms claiming GST refunds without actually conducting business, they said requesting anonymity.

“It is surprising that many fake firms and shell companies have been created that generate fake invoices to claim GST refunds. It has become an independent business, which needs to be dealt with an iron hand. Recently we caught the owner of one such fake firm in Pune that made over Rs 50 crore illegally,” one of the officials said.

The owner of the firm, which traded in fake invoices on commission basis through some fake companies, was arrested by the Pune zone unit of the Directorate General of GST Intelligence (DGGI).