GST investigation on 1.25 Lakh entities for Fake ITC

The Goods and Services Tax (GST) authorities are likely to continue follow-up investigations on over 1.25 lakh entities until December to plug revenue leakages, a senior government official told on September 15. These investigations concern bogus input tax credits (ITC).

GST taxpayers can claim ITC for taxes paid on inputs used in the production of goods or services. Fake invoicing occurs when invoices are issued despite the absence of a genuine supply of goods or services. These invoices are then used to obtain ITC, causing the government to lose revenue.

The fake credits discovered in the first special drive totaled Rs.63,000 crore. The revenue department is currently conducting follow-up investigations. This occurs following the first stage of the special drive. We must now determine who received the fake ITC supplies. “References are being made to verify levels 1 and 2 of the bogus ITC chain,” said the official.

The Central Board of Indirect Taxes and Customs (CBIC) conducted a two-month special investigation from May 14 to July 14, during which 77,200 entities were verified, of which 20,800 were found to be bogus. “Originally 77,200 entities were identified as risky, and follow-up investigations were done on more than 1.25 lakh entities,” he said.

The 1.25 lakh companies are the probe’s second layer. The 1.25 lakh companies are located throughout India. Some of them may be non-existent or fabricated. However, many of them are government agencies and well-known corporations, as another senior government official previously told Moneycontrol.

The Centre and the states are working together on the follow-up investigation drive. For example, a fictitious entity based in Delhi is said to have supplied five companies in Madhya Pradesh, Bihar, Chhattisgarh, and other states. As a result, all five companies are now being investigated by state tax authorities.

“This follow-up investigation will continue until the CBIC verifies all of the entities that received the supply of counterfeit bills.” It could last until the end of December. If the authorities discover more companies in the investigation, the investigation will be escalated to the second level of the supply chain,” he said.

He also stated that the CBIC intends to hold a review meeting of the investigations with central and state GST officials.

Meanwhile, the special drive’s findings are being adjudicated. Liabilities will be determined by the authorities based on evidence.