Rs 450-crore Input Tax Credit: Intelligence unit unearths fake GST bills business – The Financial Express–23.05.2018

The intelligence unit for the goods and services tax (GST) has unearthed a nexus among businesses that use fake bills to claim input tax credit (ITC). Given the value of the fictitious purchases is estimated to be around `2,500 crore, the undeserved ITCs pocketed by these firms are seen to be `450 crore at an average GST rate of 18%.

Sources said that the fake bill provider is absconding but the government has started issuing summons to businesses that produced these counterfeit bills to claim tax credits.

One such notice issued by the Directorate General of Goods and Services Tax Intelligence (DGGSTI) unit in Meerut has been reviewed by FE. It has invoked the erstwhile excise, service tax as well as the new GST Acts and has asked the taxpayer to “give evidence truthfully on such matters concerning the enquiry as you may be asked and produce the documents and record mentioned in the schedule for the examination”.

The invocation of service tax law ensures that the department can look into documents for the last five years as well.

The modus operandi involves businesses buying invalid bills, which enables them to claim input tax credit on the fictitious supply. A portion of this amount is paid to the providers of such bills as commission.

“Based on a fake invoices of supplies worth Rs 118, say, of goods attracting 18% GST, a taxpayer can claim Rs 18 as ITC. It pays Rs 3-5 to the fake bill seller and pockets the rest,” a source explained. He said such invoices usually show supplies of white goods or other commodities attracting higher rates.

“The racket has hampered the tax collections, as many suppliers have converted their B2C (business-to-consumer) sales into B2B (business-to-business) sales, thereby passing on the input tax credit to the recipient. The tax so paid under B2C supplies is an accrued revenue for the government, whereas taxes paid under B2B supplies is a liability which would be adjusted till a final B2C supply occurs,” said Rajat Mohan, partner, AMRG & Associates.

The government has long suspected large-scale evasion in credit claims including transitional credit, which was claimed on tax-paid goods brought to GST regime after July 1. taxpayers have claimed over Rs 1.6 lakh crore as transitional credit till December last year when the window for such claims closed.

Thereafter, the Central Board of Indirect Taxes and Customs (CBIC) culled out the top 50,000 such claimants, who are responsible for nearly 90% of the claims, for detailed verification. This exercise is stipulated to run through out this year.

Similarly, in the absence of an invoice-matching system of return-filing, taxpayers have been allowed to file a monthly summary return (GSTR-3B) with self-declared tax liability and ITC availability. Although they are required to file sales invoices also under GSTR-1 return, the matching of inward and outward supplies have been hampered leading to evasion.

Tax officials say that enforcement action is not in full swing yet as the government believes assessees need more time to adjust to the new system, matching of large amount of taxpayer data is resulting in exposing anomalies.

via Rs 450-crore Input Tax Credit: Intelligence unit unearths fake GST bills business – The Financial Express

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