GST Drive Exposes 29,273 Bogus Firms in Massive Tax Evasion Scandal

Introduction

In a significant move to combat frauds in the Goods and Services Tax system and enhance compliance, the GST formations under the Central Board of Indirect Taxes and Customs (CBIC) and State/UT Governments have executed a relentless drive against non-existent taxpayers since May 2023. The latest report reveals that a staggering 29,273 bogus firms involved in suspected Input Tax Credit (ITC) evasion of Rs. 44,015 crores have been unearthed, underscoring the scale of the issue.

Key Findings

• Detection of Bogus Firms: Since the initiation of the special drive against fake registrations in mid-May 2023, authorities have uncovered 29,273 bogus firms engaged in suspected ITC evasion. The findings indicate a systemic problem that has potentially cost the government substantial revenue.
• Financial Impact: The suspected ITC evasion amounts to a whopping Rs. 44,015 crores. The authorities have successfully saved Rs. 4,646 crores, with Rs. 3,802 crores recovered and Rs. 844 crores protected by blocking ITC. This underscores the immediate need for measures to address the vulnerabilities in the system.
• Arrests and Legal Actions: As a part of the drive, 121 arrests have been made in connection with these cases. This suggests a concerted effort to not only uncover fraudulent activities but also to hold those responsible accountable.
• Recent Quarter Performance: In the quarter ending December 2023, 4,153 bogus firms were detected, with suspected ITC evasion amounting to around Rs. 12,036 crores. Central GST Authorities detected 2,358 of these firms, leading to the protection of revenue totaling Rs. 1,317 crores. The quarter also saw 41 arrests, with 31 made by Central GST Authorities.

Government Initiatives

• Strengthening GST Registration Process: The government has taken proactive steps to strengthen the GST registration process. Pilot projects of biometric-based Aadhar authentication during registration have been launched in Gujarat, Puducherry, and Andhra Pradesh. This aims to enhance the verification process and reduce the likelihood of fraudulent registrations.
• Evasion Prevention Measures: Various measures have been implemented to curb tax evasion, including sequential filing of GST returns, system-generated intimation for reconciliation of gaps in tax liability, and addressing discrepancies between ITC available as per GSTR-2B and ITC availed in GSTR-3B returns. The use of data analytics and risk parameters for detecting fake ITC further demonstrates the government's commitment to curbing fraudulent activities.

The revelation of 29,273 bogus firms involved in suspected ITC evasion highlights the magnitude of the challenge faced by GST authorities. The government's swift actions, including arrests and the implementation of robust measures, underscore its commitment to combating tax evasion and ensuring the integrity of the GST system. Going forward, continuous efforts will be essential to plug existing loopholes and maintain the efficacy of the tax collection mechanism. The recent drive serves as a stark reminder of the importance of vigilance and innovation in adapting to evolving challenges in the realm of taxation.