Second Special All-India Drive Against Fake GST Registrations: Key Guidelines and Action Plan

Introduction

On August 12, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Instruction No. 02/2024-GST. This document outlines the guidelines for a second special All-India drive against fake GST registrations. This initiative, a follow-up to the successful drive conducted in 2023, aims to further cleanse the tax system by targeting suspicious and fraudulent GST registrations.

Background

The first special All-India drive, conducted between May 16, 2023, and August 14, 2023, proved effective in identifying and eliminating fake registrations from the GST ecosystem. In a meeting held on July 11, 2024, the National Coordination Committee, led by CBIC's Member (GST), reviewed the outcomes of the 2023 drive and determined the need for another coordinated effort to address ongoing concerns with fake registrations and bogus invoices.

Details of the Second Special All-India Drive

Period of the Drive

• The drive is scheduled to run from August 16, 2024, to October 15, 2024. During this period, Central and State tax administrations will focus on identifying, verifying, and eliminating suspicious or fake GST Identification Numbers (GSTINs). 

Identification of Fraudulent GSTINs

• The GST Network (GSTN), in collaboration with the Directorate General of Analytics and Risk Management (DGARM), will identify high-risk GSTINs using data analytics and risk parameters. These GSTINs will be shared with the respective State and Central tax authorities for verification.
• In addition to the list provided by GSTN, tax authorities can also identify suspicious GSTINs through their own data analysis, intelligence gathering, and previous experiences.

Actions to be Taken by Field Formations

1. Verification and Cancellation: Upon receiving the data, jurisdictional tax officers must promptly verify the suspicious GSTINs. If a taxpayer is found to be non-existent or fictitious, the officer should initiate the suspension and cancellation of the GST registration.

2. Blocking of Input Tax Credit (ITC): The officers may block the input tax credit in the Electronic Credit Ledger under Rule 86A of CGST Rules if it is determined that the non-existent taxpayer has issued invoices without underlying supplies. 

3. Coordination Between Jurisdictions: If the recipient of a fake invoice is in a different tax jurisdiction, the details should be shared with the concerned authority for further action using the "Initiate Enquiry" functionality on the GSTN Back Office portal.

4. Nodal Officers: Each CGST Zone and State will appoint a nodal officer responsible for coordinating these activities. The details of these officers must be shared with the GST Council Secretariat within three days of the issuance of the instructions.

5. Identification of Masterminds: Tax authorities are encouraged to identify and take action against the masterminds behind these fake registrations, including recovery of government dues and provisional attachment of properties or bank accounts under Section 83 of the CGST Act.

Feedback and Reporting Mechanism

• Tax administrations must submit weekly action-taken reports using the formats provided in Annexure-A and Annexure-A1. These reports will help the GST Council Secretariat monitor progress and compile unique modus operandi detected during the drive.
• At the conclusion of the drive, GSTIN-wise feedback will be provided to GSTN, detailing the outcome of the verification process.

Monitoring and Coordination

• The Principal Chief Commissioner/Chief Commissioner of Central GST Zones and the Chief Commissioner/Commissioner of States/UTs will oversee the actions taken on the identified GSTINs. The GST Council Secretariat will compile the reports and present findings to the National Coordination Committee for further dissemination.

Handling Difficulties

• Any challenges faced during the implementation of these instructions should be reported to the Board for resolution.

CONCLUSION

The second special All-India drive against fake GST registrations reflects the government's continued commitment to safeguarding revenue and ensuring the integrity of the GST system. With coordinated efforts from Central and State tax authorities, the drive aims to weed out fraudulent entities, protect genuine taxpayers, and enhance overall tax compliance across the country.