GST laws: Panel to meet Wednesday, amendment likely to prevent fake invoice scams

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November 17, 2020 7:15 AM

An urgent meeting of the law committee of the GST Council will be convened on Wednesday with a mandate to suggest remedies.

Currently, a GST registration is granted without any prior verification and is deemed granted within three days if an application doesn’t elicit any adverse response from tax authorities.Currently, a GST registration is granted without any prior verification and is deemed granted within three days if an application doesn’t elicit any adverse response from tax authorities.

After launching a nationwide drive against fake invoice scams plaguing the GST regime, the government is planning structural and legal changes to control unscrupulous businesses from bleeding the exchequer. The measures may include tightening the registration process along with amendments to relevant laws, sources in the finance ministry said.

An urgent meeting of the law committee of the GST Council will be convened on Wednesday with a mandate to suggest remedies.

This was prompted by the results of the drive which saw Directorate General of GST Intelligence (DGGI) arresting 25 persons including two professionals, and identifying about 1,180 entities involved in availing and passing on of ineligible input tax credit (ITC) fraudulently. Further, over 350 cases have been registered between November 9-13.

Sources said that measures like undertaking detailed financial and physical verification for GST registration involving promoters who lack commensurate financial track record like regular reporting and payment of income tax could be considered. “The provisions related to deemed registration under GST law may also be tightened to prevent misuse of such provisions by fake dealers,” the source said.

Currently, a GST registration is granted without any prior verification and is deemed granted within three days if an application doesn’t elicit any adverse response from tax authorities. Sources said that unscrupulous elements have exploited the expeditious system of registration which is then used to manipulate the system through fake invoices.

“The provisions related to suspension of registration may also be streamlined to make the procedure of cancellation faster so that such fraud operators can be prevented in time from continuing to pass on fake credit down the chain,” another source said.

The tax department has found that fake invoices were not only issued for availing or passing on of the ITC but were also used as conduit for other illegal activities leading to tax evasion, massive bank loan fraud, money laundering and hawala transactions in many cases. A majority of the offenders operate fly-by-night firms and utilise a network of such shell companies to game the system.

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