GST Fraud: Modi govt cracks whip on tax evaders; intercepts export consignments at Mundra, other ports

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Updated: September 12, 2019 8:37 PM

Fake GST bills: Dwindelling GST collection forced the Modi govt to crack down on the exporters who were fraudulently claiming tax refunds on the basis of bogus GST invoices.

Nirmala Sitharaman, GST, DRI, Tax Evasion, Fake GST InvoiceFinance Minister Nirmala Sitharaman.

Fake GST Invoice: Two years after the implementation of a common nationwide goods and services tax law, the Modi government has launched a major enforcement drive against the tax evaders. In an unprecedented operation, a joint team of directorate of revenue intelligence and directorate general of GST intelligence raided more than 300 locations across the country. The operation was so massive that it involved more than thousand tax officers of CBIC. It also involved interception of live export consignments at Vadodara rail container terminal, Mundra port and Nhava Sheva port to detect any misreporting by exporters.

“In the biggest ever joint operation by DGGI and DRI against the exporters who were fradulently claiming refund of IGST, pan-India searches were carried out at 336 different locations across the country,” ministry of finance said in a statement.

The joint operation of the two premier intelligence agencies of the central board of indirect taxes and customs (CBIC) was a first of its kind involving about 1200 officers.

CBIC said analysis of the data revealed that some exporters were exporting goods on payment of IGST entirely on the basis of input tax credit availed on fake supplies and these IGST payments were claimed as refund on export.

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How the govt unearthed the GST fraud

In order to detect this huge GST evasion by exporters, tax officers used the data provided by the directorate general of analytics and risk management (DGARM). The exercise involved matching of export data available with the Customs deparment with the corresponding GST data of exporters.
The exercise revealed that there was hardly any payment of tax through cash by exporters and their suppliers.

“In few cases, even the tax paid through ITC was more than the ITC availed by these firms. On the basis of this intelligence, searches were conducted on the premises of exporters and their suppliers,” said the government.

“The day long operation revealed that many of the entities spread across the length and breadth of the country were either non-existent or had given fictitious addresses.”

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Amount of GST Fraud

An early investigation conducted by the tax officials revealed that input tax credit of more than Rs 470 crore was availed on the basis of fake or bogus invoices. The invoice value of these transactions were around Rs 3,500 crore. It was used by exporters for fradulently claiming cash refund.

Another IGST refund of Rs 450 crore is also under examination of tax authorities. During the search operations, tax officers have also apprehended live export consignments of these exporters at Vadodara Rail Container Terminal, Mundra Port and Nhava Sheva Port to detect any misreporting of the information.

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Area of search operation

The operation covered more than 300 locations spread across two Union territories – national capital Delhi and Chandigarh and 13 states.

In addition to Delhi and Chandigarh, raids were conducted in state of Haryana, Uttar Pradesh, Gujarat, Maharashtra, Tamil Nadu, West Bengal, Karnataka, Madhya Pradesh, Telangana, Punjab, Rajasthan, Himachal Pradesh, Uttarakhand.

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