“Exclusive insights from ex-GSTN VP Veer Singh Verma: All-India special drive targets bogus ITC suppliers. Genuine taxpayers assured, no scrutiny. Stay informed!”
In a recent interview dated 17-05-2023, Sh. Veer Singh Verma, the ex-Vice President of GSTN (Services) and retired Additional Commissioner (Appeal), dispelled any concerns surrounding the all-India special drive. With reassuring emphasis, he conveyed that this special drive is targeted solely at suppliers involved in passing off bogus Input Tax Credit (ITC). Genuine taxpayers have nothing to fear, as they will not be visited by officials.
A Glimpse into the Interview –
Q.1 What led to this all-India special drive?
Ans. The introduction of the GST law aimed to streamline the registration process and provide faster registrations through deemed approvals. However, some states advocated for the continuation of physical verification, as was practiced under the VAT regime. Nonetheless, the Government insisted on eliminating human interference to simplify the registration process. Unfortunately, unscrupulous individuals exploited the fast-track approval system, registering firms involved in fraudulent activities such as passing on substantial bogus Input Tax Credit (ITC) using forged documents like rent agreements, electricity bills, and Aadhaar cards. A recent racket was exposed in Gujarat, highlighting the magnitude of revenue loss suffered by the government.
Q.2 Are all taxpayers subject to verification/visits during the special drive? What kind of businesses will be visited?
Ans Genuine taxpayers have nothing to worry about. The special drive targets only those taxpayers who are involved in passing on bogus ITC. Genuine taxpayers can rest assured that they will not be subject to any verification or scrutiny.
Q.3 What if a genuine taxpayer has changed their office/shop address without updating their GST registration?
Ans. If a genuine taxpayer has shifted their office/shop without updating their GST registration within the 15-day time limit, they should promptly declare their new address through an amendment. Genuine taxpayers need not fear as they will not be subjected to any verification or scrutiny.
Q.4 What documents will the tax officials carry during the physical verification?
Ans. During the physical verification, the tax officials will carry an authorization document called Form GST INS-01. This form is issued by the Joint Commissioner based on a ‘reason to believe.’ It’s important to note that no Form GST INS-01 will be issued in respect of genuine taxpayers.
Q.5 What should a taxpayer do if a tax official conducts verification without the authorized Form GST INS-01 during the special drive?
A: Taxpayers should not allow any physical verification without the authorized Form GST INS-01. Since Form GST INS-01 is issued by the Joint Commissioner, it is not possible for them to issue authorization for all taxpayers. This also proves that apprehensions that verification of all taxpayers shall be undertaken are totally unfounded.
Q.6 What happens if a supplier is found to be involved in bogus activities?
Ans A time-bound Standard Operating Procedure (SOP) has been issued. In such cases, the ITC ledger will be blocked straightforwardly under Section 86A. Action will also be taken under Section 29(2) for cancellation of registration, including cancellation from a retrospective date, and REG-17 shall be issued. Provisional attachment under Section 83 can also be done. Further actions will be guided by Circular No. 171/03/2022-GST dated 6th July 2022.
Q.7 What actions will be taken against recipients of bogus suppliers?
Ans. The GSTN/DGRAM has already identified most of the buyers/recipients of bogus suppliers through the GSTR-1 filings. Actions will be taken against them as well.
Q.8 What happens if no one comes forward to pay the dues after show cause notices or verification due to the non-existence of suppliers?
Ans. In such cases, there is usually a mastermind behind the bogus ITC chain. These masterminds will be identified, and penalties as per Section 122(1A) will be imposed, along with provisional attachment under Section 83. Similar actions will be taken against all the beneficiaries.
Q.9 Is it necessary for all partners/directors/members to be present during physical verification?
Ans. No, there is no such requirement in the GST law.
Q.10 Are there any other important comments regarding these fraudulent activities?
Ans In Uttarakhand, around 27 bogus firms have been identified in the past, situated in different jurisdictions. The amount involved in the scam was around Rs. 8000 crores, whereas the total collection of the state is around Rs. 11000 crores. This signifies the extent of loss caused to the government by these fraudulent activities. The money involved in these scams is used for illegal activities that harm the economy and the country at large. Bogus ITC players are more harmful to the nation than tax evaders.
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(Disclaimer: This article is for general information purposes only and does not constitute legal advice. The author is not a lawyer and does not provide professional legal counsel. Laws vary by jurisdiction, and the content may not be up to date. No attorney-client relationship is formed by reading this article. The author and publisher are not liable for any reliance on the information. Seek legal advice from a qualified attorney for specific legal concerns. External links are provided (if any) for convenience, and their content is not endorsed. Consult a legal professional for accurate and updated information.)
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