On Sunday, the Ministry of Finance said that the Goods and Services Tax (GST) authorities had found 4,153 false companies suspected of evading input tax credit (ITC) worth approximately Rs 12,036 crore between October and December 2023. Of the 36 states and union territories (UT), Maharashtra ranks first with the greatest number of 926 bogus firms that have engaged in suspected tax evasion totaling Rs 2,201 crore. However, Delhi has demonstrated a higher incidence of tax evasion, with 483 bogus firms suspected of evading taxes totaling Rs 3,028 crore.
Haryana leads all states/union territories in the number of fake firms per lakh registered firms, with 81 of them. Delhi comes in second with 61 fake firms per lakh registered firms, Rajasthan with 59 fake firms per lakh registered firms, and Maharashtra with 54 fake firms per lakh registered firms.
Central GST officials found 2,358 of the 4,153 fraudulent companies that were discovered during the October–December quarter. “A total of 41 people have been arrested in these cases, 31 of whom were by Central GST Authorities,” the Ministry statement stated. “This has helped protect the revenue of Rs 1,317 crore, out of which Rs 319 crore has been realized and Rs 997 crore has been protected by blocking input tax credit.”
The Central Board of Indirect Taxes and Customs (CBIC) and state/UT governments, in conjunction with the GST authorities, have been taking action against fraudulent firms to reduce fraud and boost compliance. Tax authorities have launched targeted campaigns against the issuance of false invoices without any supporting supply of goods and services and non-existent/bogus registrations.
In mid-May of last year, a special campaign was launched under GST to combat fraudulent registrations. In April of last year, The Indian Express published a report detailing multiple cases of fraudulent companies avoiding taxes by supplying manpower for services instead of goods from Gujarat to Bihar. These companies did this to avoid creating e-way bills, which are required for the interstate transportation of goods valued at more than Rs 50,000.
Additionally, there have been cases where Aadhaar has connected companies to random people’s mobile numbers. These people then began receiving OTPs and multiple GST registrations from the same address. In many of these cases, fictitious documents were produced. After discussions at the highest levels of government, tax authorities discovered these fraud cases under the GST regime, which led them to launch a special campaign against frauds linked to registration in 2023–2024.
According to the Ministry, since then, 29,273 false companies implicated in alleged ITC (Input Tax Credit) evasion of Rs 44,015 crore have been found. “This has prevented ITC from taking $3,802 crore, saving Rs 4,646 crore; the remaining Rs 844 crore are from recovery. It said that 121 arrests have been made thus far in the cases.
To increase revenue collections, tax authorities have identified registration-linked frauds as one of the main focus areas for tighter scrutiny in the financial year 2023–2024. No significant changes to the GST rate are anticipated before the general elections, which are anticipated to take place in the coming months. The GST registration procedure has prompted the government to take several actions. Three additional states have started pilot programs involving biometric-based Aadhaar authentication during registration: Gujarat, Puducherry, and Andhra Pradesh.
The government has also implemented steps to reduce tax evasion, including the filing of GST returns in a sequential manner, the use of data analytics and risk parameters to identify fake ITC, and the generation of system-generated notifications for reconciling the discrepancies in tax liability between GSTR-1 and GSTR-3B returns and the ITC available under GSTR-2B and the ITC availed in GSTR-3B returns.