Nationwide Initiative to Combat Fake GST Registrations by Department

“Join the nationwide initiative against fake GST registrations! Learn about the mechanisms and actions planned by the GST departments. Stay informed on the special drive to combat bogus invoices and protect government revenue.”

Nationwide Initiative to Combat Fake GST Registrations: Mechanisms and Actions by the Department – Instruction No. 01/2023-GST dated 04th May, 2023

In a concerted effort to tackle the pervasive issue of fake and bogus GST registrations, the Central and state GST departments have planned a special all-India drive from May 16th to July 15th, 2023. This initiative aims to verify and take appropriate action against suspicious suppliers and curb the issuance of bogus invoices, ultimately preventing revenue losses to the government.

In this article, we will delve into the mechanism that will be adopted during the verification drive and outline the potential penal actions against those engaging in fraudulent practices.

Step-1: Identification of suspicious/ bogus suppliers.

Step-2: Detailed verification such identified suppliers.

Step-3(a): If supplier found genuine – No further action shall be taken.

Step-3(b): If supplier found non-existent and fictitious – Steps 4(a) & 4(b) shall be taken.

Step-4(a): Action against the identified bogus suppliers –

• Immediate Suspension and Cancellation of registration under section 29.
• Blockage of ITC ledger under rule 86A (if deemed necessary).
• Provisional Attachment under section 83.
• Penalty under section122 (1)(ii) and 122(1)(xii) of the GST Act (Rs. 10000 or an amount equivalent to ITC passed on, whichever is higher).
• Prosecution under section 132 subject to conditions specified therein.

Step-4(b): Action against recipient(s) of the identified bogus supplier – The details of the recipients to whom the input tax credit shall be identified through the FORM GSTR-1 by such bogus supplier.

• If recipient(s) is in same jurisdiction as that of supplier – The jurisdictional officer who initiated proceeding against supplier shall also act against the recipient.
• If recipient(s) is in different jurisdiction – The concerned jurisdictional officer will be informed.

Potential Action –

• Demand and recovery under section 73/74 due to non-satisfaction of conditions specified under section 16(2)(b) of the GST Act.
• Recovery under section 79 along with applicable interest under provisions of section 50.
• Attachment under section 83 read with rules made thereunder.
• Prosecution under section 132 may be initiated, subject to conditions specified therein.

Step-5: Reporting by the Central & State authorities to GST Council Secretariat who shall report to the National Coordination Committee.

Important Considerations:

• Suspension/Cancellation of registration and blocking of ITC ledger shall not be made w.r.t the recipients of bogus suppliers unless they are also involved in bogus transactions.
• These guidelines shall act as a guidance for the department in cases of fake registrations even after the conclusion of the special drive.
• The drive is against fake/non-existent suppliers which are suspected to have obtained registration of principal place of business on the basis of forged documents such as forged electricity bills, property tax receipts, rent agreements, etc.
• If any new modus operandi is detected during the verification/ investigation, the same may also be reported to the National Coordination Committee, which will be subsequently shared with all the Central and State Tax administrations across the country which will help in busting any similar rackets.
• Action under section 83 shall be taken and also a penalty under section 122(1A) [equivalent to tax evaded or input tax credit availed of or passed on] may be levied against the masterminds/ beneficiaries/linked registrations behind such bogus registrations. Prosecution under section 132 may also be initiated against such persons.
• Verification shall be done by the jurisdictional tax officer(s) of the supplier.
• The verification shall be against fake regsitrations who are making bogus supplies. From there, action against recipents of such bogus supplies shall be taken.
• These instructions issued are in harmony with Circular No. 171/03/2022-GST dated 6th July, 2022 regarding applicability of demand and penalty provisions under the Goods and Services Tax Act, 2017 in respect of transactions involving fake invoices.

The ongoing special drive against fake/bogus GST registrations demonstrates the commitment of the Central and state GST departments to ensuring the integrity of the taxation system. By implementing robust verification mechanisms and taking stringent actions against both bogus suppliers and recipients, the authorities aim to curb revenue losses and promote a transparent and trustworthy business environment. The provided guidelines and cooperation with various stakeholders will further strengthen the effectiveness of this initiative.

Guidelines for Special All-India Drive against fake GST registrations

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