Introduction
On August 12, 2024, the Central Board of Indirect Taxes & Customs which comes under the Ministry of Finance, issued Instruction No. 02/2024-GST. This directive focuses on launching a second Special All-India Drive against fake Goods and Services Tax registrations. The drive is a coordinated effort between Central and State tax authorities to detect, verify, and eliminate fake registrations and bogus invoices that undermine the GST system and cause significant revenue loss to the government.
The initial Special All-India Drive, conducted between May 16, 2023, and August 14, 2023, was highly effective in identifying and removing fake registrations. This success highlighted the need for continued vigilance, leading to the decision to conduct a second drive. The National Coordination Committee, responsible for overseeing the first drive, hereby recognized the importance of this ongoing effort and recommended the second phase to further clean up the tax base.
Now as we continue, I will be happy to see your comment below, relating to your thoughts whether CBIC will add this in act to continue this drive indefinitely to catch fake GST registrations? Till then let’s discuss what are the main guidelines for the second special all-India drive
The guidelines outlined in Instruction No. 02/2024-GST provide a comprehensive framework for the second drive, ensuring that the actions of Central and State tax authorities are synchronized and effective.
Below are the key elements of these guidelines:
First one is the time duration of this special drive: This drive will run from August 16, 2024, to October 15, 2024. During this period, tax administrations across the country will focus on identifying and verifying suspicious or fake GST Identification Numbers or fake GST registrations
Second one is the identification of fraudulent GSTINs where the GST Network or data of GST numbers, in collaboration with the Directorate General of Analytics and Risk Management (DGARM) which will play a role in generating a list of high-risk GSTINs. These GSTINs which are generated by the method followed by DGARM will be flagged for verification by the respective tax authorities.
Central and State Tax authorities are given powers to supplement this list by conducting their own data analysis and intelligence gathering.
Third one is the action to Be taken by field formations that means upon receiving the list of suspicious GSTINs, jurisdictional tax officers are required to verify these registrations. If a registration is found to be fake or non-existent, the officer must take immediate action to suspend and cancel the registration as per Section 29 of the CGST Act.
What is section 29 of the CGST Act, 2017?
If the Proper Officer (PO) has reason to believe that a person’s registration is liable for cancellation under Section 29, they shall issue a notice in Form GST REG-17. This notice will require the person to provide a justification within 7 working days from the date of service, explaining why their registration should not be cancelled.
In this the input tax credit which is associated with these fake registrations must be blocked, along with any recipients of such credit identified. Further actions include recovery of the wrongly availed ITC and communication with other tax jurisdictions will be made if authorities find it necessary.
Forth one is the coordination and information sharing where a designated officer which is going to be appointed by each CGST Zone and State to coordinate the sharing of information between different tax jurisdictions. This officer is going to ensure that the data is shared promptly and accurately, which will help in facilitating immediate and smooth action across the regions.
Fifth one is the Feedback and Reporting Mechanism, in this the weekly reports with details on the actions taken, the amount of tax evasion detected, and recoveries made will be submitted through the designated officers. This reporting will enable the GST Council Secretariat to monitor the progress of the drive and compile a comprehensive report for the National Coordination Committee.
Any novel modus operandi or unusual activity discovered during the drive must be documented and shared with the Committee as per the prescribed method.
Sixth element is the monitoring and oversight in which the senior officials from both Central and State tax authorities are given a task to closely monitor the progress of this drive. It is the responsibility of the secretariat of GST council to compile and share the reports with the National Coordination Committee, who is given a responsibility to distribute the findings and the best practices to be followed by all tax administrations.
What are the implications of the second special drive?
This second drive represents a critical step in the ongoing battle against tax evasion in India. By focusing on fake registrations and bogus invoices, the government aims to protect its revenue base and maintain the integrity of the GST system.
The expectations of this drive is to reduce the prevalence of fake GSTINs, thereby enhancing the reliability of the GST network, to avoid problems or confusions for person availing ITC, to deter tax evasion through stricter enforcement and better coordination between Central and State authorities, To encourage compliance among the taxpayers, knowing that their registrations and transactions will be closely monitored, hence it will generate fear for tax payers of fines, penalties or even cancellation of registration in case of non-compliance, and to Strengthen the overall tax administration by incorporating lessons learned from the first drive and leveraging advanced analytics and intelligence tools.
Conclusion
Instruction No. 02/2024-GST sets the stage for a robust and targeted approach to eliminating fake GST registrations and invoices. The second Special All-India Drive underscores the government’s commitment to safeguarding its revenue and ensuring the effectiveness of the GST regime. As the drive progresses, it will be essential to maintain close coordination among all stakeholders and to continuously adapt strategies based on the findings and challenges encountered. The ultimate goal is a cleaner, more transparent GST ecosystem that supports the nation’s economic growth by proper receipt and utilisation of tax amount by government.
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