Special All-India Drive against fake GST registrations and bogus GST invoicing

[Kapil Mahani]

Key Features

• The Central and State tax administrators shall be launching Special All-India Drive from May 16, 2023, to July 15, 2023, to identify fictitious GST numbers and transfer of Input Tax Credit (‘ITC’) based on the invoice without physical movement of goods.
• The Special Drive has been announced to verify the existence of only suspicious GSTINs.
• Such suspicious GSTINs would be identified through data analytical tools.

• Genuine Taxpayers are not required to panic from such a special drive as the verification is unlikely to be carried out in the case of Genuine Taxpayers.
• Genuine Taxpayers are only required to ensure that all the GST compliances as required to be maintained in the normal course of business and maintain the following copies of the following documents:

• GST registration
• Aadhar Card
• Pan Card
• Rent Agreement
• Latest Electricity Bill
• Current Bank Account canceled cheque
• Purchase Bill
• Sales Bill
• Sign Board including name of firm, address and GST number of firm.

Repercussions of such special drive on supplier and recipient

Repercussions on Supplier

Repercussions on  Recipient

The GST Department can suspend and cancel GST registration under Section 29 of the Central Goods and Services Tax Act, 2017 in case it found that registered person has obtained fake registration. The GST Department can impose a penalty under Section 122 (1)(ii) of the CGST Act for issuing a tax invoice without actual supply of goods or services or both. The GST Department can attach bank account of supplier under Section 83 of the CGST Act to protect interest of revenue.

The GST Department can initiate recovery proceedings under Section 74 of the CGST Act imposing tax, interest, and penalties against taxpayers in case it is found that recipient has taken ITC on fraud invoices. In case GSTIN of recipient pertains to the jurisdiction of the tax authority itself, suitable action may be initiated for demand and recovery of the input tax credit wrongly availed by such recipient on the basis of invoice issued by the said non-existing supplier. In case recipient GSTIN pertains to a different tax jurisdiction, the details of the case along with the relevant documents/ evidence, may be sent to the concerned tax authority in specified prescribed format. The GST Department can block ITC ledger of the recipient under Rule 86A of the CGST Rules. in case the Department has reasonable belief that recipient has fraudulently availed ITC. The GST Department can arrest a recipient under Section 132 of the CGST Act in case it has claimed fraudulent ITC more than five crores.

Rights and Obligations of the Supplier and Recipient during such special drive

Rights and obligations of Supplier

Rights and obligations of Recipient

Supplier should maintain books of accounts at its principal place of business such as inward and outward supplies of goods or services, stock of goods, ITC availed, output tax payable and paid etc. The Supplier should cooperate with the Department. The supplier has right to take copy of documents seized. The supplier has right to receive copies of documents seized within 30 days from issuance of notice by department The supplier has right to call consultant which can be present at visible distance during the investigation proceedings.

The Recipient should cooperate with the Department. Recipient of services/goods should reverse ITC in case it came to know that such vendors are fraudulent. The recipient has right to take copy of documents seized. The Department has right to receive copies of documents within 30 days from issuance of notice by department. The supplier has right to call consultant which can be present at visible distance during the investigation proceedings.