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Revenue officials arrested 25 people and filed 350 cases of fake invoicing, in a major drive against tax evasion, said an official of the Directorate General of GST Intelligence (DGGI), on conditions of anonymity.

The fake invoices were used to evade goods and services tax (GST) and income tax and to divert funds from companies, the official said. The fake invoices were issued against more than 1,100 entities, he said.

Fake invoices are also used to show non-existent transactions to hike figures on the books to obtain loans from banks and to siphon off funds and also to claim GST refunds for exporters.

Increasing instances of non-compliance has prompted the government to tighten the process for new GST registration, he said.

The new rules mandate business owners or promoters not having commensurate income-tax payment records to undergo physical and financial verification process before their companies can be given GST registration, said the official.

Investigations showed that fake invoices are issued rampantly for certain products such as metals, plastic granules, ready-made garments, gold and silver, construction services, work contract services, agro products, manpower supply and advertisement, and animation services, he said. The enforcement directorate (ED) will also investigate the cases, said the official.

Direct and indirect tax authorities have been scaling up the use of technology and data analytics to identify businesses with poor compliance track record. This is expected to gain further momentum with the sharp reduction in tax revenues this year.

The GST authorities have made electronic invoicing (e-invoice) compulsory for businesses with sales of more than 500 crore from 1 October.

Come 1 April 2021, e-invoice services will be extended to businesses with sales of more than 100 crore. The move will help officials get an idea of the transactions taking place in the economy on a real-time basis and enable them to pre-empt fraud.

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