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GST laws have been tightened in recent months to improve compliance.
GST laws have been tightened in recent months to improve compliance.

Govt unearths fake invoice racket involving 115 firms

  • The bogus firms set up for generating fake invoices are spread across Gujarat, Maharashtra and Rajasthan and the Directorate General of GST Intelligence is keeping a non-intrusive, yet close watch on questionable use of tax credits

NEW DELHI: The government has unearthed a fake invoice racket involving 115 firms that allegedly passed on tax credits without supplying goods or services, leading to the arrest of one person, said a finance ministry official. Investigation showed that the firms had wrongfully passed on 50 crore of tax credits.

The fraud was detected with the aid of data analytics. The person, arrested in Ahmedabad for registering bogus firms, is a chartered accountancy student and partner in an accountancy firm.

The bogus firms set up for generating fake invoices are spread across the tax administration of Gujarat, Maharashtra and Rajasthan. The official quoted above said the Directorate General of GST Intelligence (DGGI) is keeping a non-intrusive, yet close watch on questionable use of tax credits.

“These firms might be issuing fake invoices to the recipients without actual supply of any goods or services who in turn are availing input tax credit on the basis of these fake invoices," said the official. The firms issued invoices mainly in relation to supply of manpower and consultancy services. The investigation is on.

Legal provisions are being further tightened to check wrongful use of tax credits, said the official. The government is looking at classifying firms with questionable compliance track record in the risky category, the same way it rates exporters based on their compliance history, said the official, who spoke on condition of anonymity. Their refunds can be blocked in addition to taking legal action against them, said the official.

GST laws have been tightened in recent months to improve compliance. From October, a process of e-invoicing has been made applicable to large businesses and Aadhaar authentication was rolled out in August for GST registration.

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