Crackdown on Dummy GST Number: All India Special Drive

Stay informed with the latest GST update: All India special drive launched to combat fake GST registrations. Ensure compliance and authenticity.

Goods and Services Tax (GST) is a significant indirect tax reform that has transformed India’s taxation landscape. However, with the benefits of GST come challenges, and one such pressing concern is the rise of fake GST number. In an effort to combat this issue, authorities have launched a Special Drive to curb dummy GST number and maintain the integrity of the GST system. This blog aims to explore the objective of this initiative, the nature of investigations involving physical verification under Rule 25, and the concerns that arise due to fake GST registrations.

Objective of the Special Drive

The primary objective of the Special Drive against fake GST number is to identify and eliminate entities that have obtained GST registration through fraudulent means. Fake registrations can lead to tax evasion, misuse of Input Tax Credit (ITC), and other illegal activities, compromising the credibility of the GST system. By weeding out these fake registrations, the government aims to enhance tax compliance, promote a fair business environment, and protect honest taxpayers from unfair competition.

Nature of Investigation: Physical Verification under Rule 25

To identify dummy GST number, tax authorities carry out investigations that may involve physical verification under Rule 25 of the Central Goods and Services Tax Rules, 2017. This rule empowers the proper officer to undertake visits to the registered business premises to ascertain the authenticity of the information provided during the registration process. Physical verification allows authorities to validate the existence of the registered business, the nature of its operations, and its compliance with GST regulations.

During physical verification, officers may inspect the premises, review records, verify invoices and transactions, and interact with the business owner and staff. The goal is to ensure that the registered entity is genuinely engaged in the declared activities and is not involved in any fraudulent practices.

Concerns

The proliferation of fake GST number poses several concerns for the economy, businesses, and the government:

• Revenue Loss: Dummy GST number enable businesses to evade taxes and claim ITC on non-existent or fictitious transactions, leading to substantial revenue losses for the government.
• Unfair Competition: Fake registrants can offer goods and services at lower prices by avoiding taxes, creating an uneven playing field for legitimate businesses that comply with GST regulations.
• Credibility of GST: Instances of dummy GST number undermine the credibility of the GST system, making it challenging to gain trust among taxpayers and stakeholders.
• Impact on Consumers: Tax evasion through fake registrations can result in higher prices for consumers, as businesses may attempt to pass on the tax burden.
• Complexity for Genuine Taxpayers: The presence of fake registrants increases the burden on honest taxpayers and authorities to verify transactions and claim genuine ITC.
• Compliance and Legal Issues: Businesses unknowingly dealing with fake registrants may face compliance issues and legal consequences, as tax authorities can hold them accountable for their dealings with fraudulent entities.

The rise of dummy GST number presents a significant challenge to the effectiveness of the GST system in India. The Special Drive against dummy GST number aims to combat tax evasion, protect genuine taxpayers, and ensure fair competition in the marketplace. By conducting physical verification under Rule 25 and addressing the concerns associated with fake registrations, the government endeavors to strengthen the GST regime and foster a transparent and accountable tax environment for businesses and taxpayers alike. Reporting any suspicions of dummy GST bills or registrations is crucial in supporting these efforts and upholding the principles of a robust taxation system.

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Addressing the Issue

To combat this growing menace, the Central and State tax administrations have detected various methods employed by unscrupulous entities to obtain fake registrations. In some cases, forged documents such as electricity bills, property tax receipts, and rent agreements are being used to provide false proof of a principal place of business for obtaining GST registration. In a recent case detected by the Gujarat State Tax authorities, it was revealed that fraudsters had obtained fake GST number using the PAN and Aadhaar numbers of individuals from economically weaker sections without their knowledge. These individuals’ Aadhaar cards were fraudulently modified at an Aadhaar Seva Centre, with their phone numbers changed to a dummy mobile number using their thumb impression.

Special Drive Guidelines

Recognizing the need for a coordinated and concerted effort, a Special All-India Drive has been launched from May 16th to July 15th, 2023, to detect suspicious and fake GSTINs and take necessary actions to remove these fake entities from the GST ecosystem. The following guidelines have been issued for the successful implementation of this Special Drive:

1. Identification of Fraudulent GSTINs: GSTN will employ detailed data analytics and risk parameters to identify suspicious GSTINs. The identified GSTINs, along with jurisdictional details, will be shared with the relevant State and Central Tax administrations. Field formations will also supplement this list through data analysis, available analytical tools, human intelligence, Aadhaar database, and past detections.
2. Information Sharing Mechanism: Nodal officers will be appointed by each Zonal CGST Zone and State to facilitate seamless data flow and coordination between tax administrations, GSTN, and DGARM. The appointment details of these officers will be compiled and shared among all tax administrations, GSTN, and DGARM.
3. Action by Field Formations: Field formations will undertake a time-bound verification exercise upon receiving data from GSTN/DGARM through the Nodal Officer. If a taxpayer is found to be non-existent and fictitious, immediate action will be taken to suspend and cancel their registration under the provisions of the CGST Act. Input tax credit may also be blocked in the Electronic Credit Ledger. Recipients who have wrongly availed input tax credit from such non-existing taxpayers will be identified, and suitable action will be initiated for recovery of the credit. Efforts will be made to identify the masterminds and beneficiaries behind the fake GSTINs for further action.
4. Feedback and Reporting Mechanism: State and CGST Zones will provide an action taken report on a weekly basis to the GST Council Secretariat, highlighting progress and any novel modus operandi discovered during verification and investigation. Field formations will also provide GSTIN-wise feedback on the verification results to GSTN/DGARM.
5. National Coordination Committee: A National Coordination Committee, led by Member [GST], CBIC, will monitor the progress of the Special Drive. The committee will meet periodically and be assisted by GSTN and the Principal Commissioner, GST Policy Wing, CBIC. The GST Council Secretariat will act as the secretariat for this committee. Talk to our CA and get full information about India Special Drive against GST.

FAQs on Fake GST Number:

1. How do I report a fake GST bill?

To report a fake GST bill or registration, you can approach the concerned tax authority or use the online portal provided by the GST department. You may need to provide details about the suspected entity, such as its GSTIN, name, and address, along with any supporting evidence.

2. What is GST drive?

The GST drive refers to the Special Drive undertaken by tax authorities to identify and eliminate fake GST registrations. Through physical verification and other investigations, the government aims to curb tax evasion and ensure compliance with GST regulations.

3. Can a fake company have a GST number?

Yes, unfortunately, fake companies can obtain GST registration through fraudulent means. This highlights the importance of the Special Drive to detect and eliminate such dummy GST number to maintain the integrity of the GST system.

Conclusion

The All-India Special Drive against fake GST online registration is a significant step in curbing fraudulent practices and protecting the government’s revenue. Through the coordinated efforts of GSTN and tax administrations at the Central and State levels, suspicious GSTINs will be identified, leading to the cancellation of non-existent and fictitious taxpayers. This drive not only ensures the integrity of the GST ecosystem but also sends a strong message to those attempting to defraud the government. By implementing these guidelines and taking proactive measures, the authorities aim to safeguard the interests of genuine taxpayers and contribute to a transparent and efficient tax system in India.