GST Misappropriation: In last 5 years Rs. 3.11 lakh crore Misused; Only Rs. 1.03 lakh crore Recovered

Tax evasion, bogus invoices with no goods delivered, cyber frauds using Goods and Services Tax (GST) identification numbers, forging up shell companies, faking business transactions, failing to deposit due taxes with authorities, and illegally claiming input tax credit (ITC) are now the leading causes of an increase in GST-related offences in the country.

The claim is supported by numbers submitted to the Lok Sabha by the Finance Ministry, which show that the number of such offences increased from 12,574 in 2021-22 to 13,492 in 2022-23 (till February).

An increase of roughly 7.3 percent comes after a 0.2 percent increase in such offences from FY21 to FY22. According to data supplied by the ministry to Parliament on Monday, there were 57,111 reported GST-related offences in the five years from 2017 to February 2023. In FY18, the number of instances was at its lowest, at 424; in FY19, it jumped to 7,368, in FY20, it was 10,657, and in FY21, it increased again to 12,574, after a decreasing trend the previous year at 12,574. From 2022 to February 23, the figure reached an all-time high of 13,492.

In terms of percentage, the increase in cases in FY19 was 44.6 percent, 18.2 percent in FY21, 0.2 percent in FY22, and 7.3 percent in FY23.

Maharashtra led the list with a total of Rs 60,000 crore in misappropriation identified, followed by Karnataka with Rs 40,507 crore, Gujarat with Rs 26,156 crore, Delhi with Rs 24,217 crore, Haryana with Rs 22,712 crore, and West Bengal with Rs 17,604 crore. According to the data, 1,316 perpetrators were apprehended in these five years, with Maharashtra having the highest number of accused.

According to the Finance Ministry, the total amount of money misappropriated and recorded in these five years is close to Rs 3.11 lakh crore, with a recovery of approximately Rs 1.03 lakh crore.

To combat fraud and embezzlement, the government has implemented a number of measures, including using robust data analytics and artificial intelligence to identify and track risky taxpayers and detect tax evasion, and conducting a nationwide special drive against unscrupulous entities for fraudulently obtaining and passing on input tax credit (ITC) on the basis of fake/bogus invoices.

In addition, availing ITC has been limited to invoices and debit notes furnished by the supplier in their statement of outward supplies, data sharing with partner law enforcement agencies for more targeted interventions, mandatory Aadhaar-based authentication for new GST registrations, and centralised suspension of registrations of registered persons who fail to file returns on time, among other regulations.

About tax evasion by insurance businesses, the revenue department informed the Lok Sabha that instances of indirect tax evasion (GST and service tax) had been recorded by the Central Board of Indirect Taxes and Customs (CBIC) field formations against various insurance companies. In the last five years, 106 incidents have been filed across the country, and Rs 7,581.80 has been misappropriated, with Rs 1,347.17 recovered.

Since the implementation of the GST in 2017, cases of tax evasion and other associated offences have increased significantly, and numerous methods of evading the indirect tax have emerged.