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In order to curb the GST fake invoice frauds, the Govt on the recommendations of the GST Council’s Law Committee has issued a notification to deal with the menace of fraudsters who avail & pass on ineligible ITC by fake or fly-by-night firms. Addressing some myths around the same


In order to curb the GST fake invoice frauds the Government on the recommendations of the GST Council's Law Committee has issued notification to deal with the menace of fraudsters who avail and pass on ineligible ITC by fake or fly-by night firms. CBIC has booked about 12000 cases of ITC fraud and arrested 365 pasons in such cases so far. During the last six weeks alone, more than 165 fraudsters have been arrested. 

There have been some misinformation on the recent rule changes on the Social Media causing confusion among the genuine taxpayers. 

CBIC therefore clarifies misinformation with facts

Myth 1: No opportunity of being heard will be given if proper officer believes that registration is liable to be cancelled. 

FACT 1: The GST laws passed by the Parliament and state legislatures provide that GST registration is liable to be cancelled for those who have not filed 6 or more returns. It is therefore wrong to say that the cancellation will be done without reasons. To protect the interest of revenue, this provision has been put in the law so that fraudsters do not run way with GST collected from their customers. 

It may be further noted that no cancellation of registration would be done without giving proper opportunity of hearing to the taxpayer. Immediate action for suspension is necessary in cases where unscrupulous operators seek to pass on huge fake credit by gaming the system. Such action will not affect genuine taxpayers and will provide them a level playing field. Moreover, suspension may be revoked by the officer based on the taxpayer's representation. 

CBIC releases  Myths v. Facts  on CGST Notification issued on 22.12.2020 to curb GST Fake invoice frauds

Myth 2: Even if there is a clerical error in filing returns, GSTIN will be cancelled. No option to correct your mistakes. 

FACT 2: This is absolutely not true. Only in fraudulent cases where there are significant discrepencies based on data analytics and sound risk parameters, and not mere clerical errors, the action of suspension and cancellation will be taken up. An example of a fraudulent case and serious discrepancy is where one has passed on Crones of Rupees of Input Tax Credit and not filed GSTR3B returns, nor has he filed Income Tax returns or disclosed very little liability in Income Tax returns etc, The GST ecosystem is very carefully worlcing towards curbing the fake invoice frauds in the interests of bonafide taxpayers. GST system applies sophisticated tools like BIFA, data analytics and AI & ML to pinpoint and segregate these fraudsters only. 

Myth 3: The proposed change will impact ease of doing business.

FACT 3: Not True. Fraudsters are misusing the system to the detriment of the interest of genuine taxpayers. Consequently, data driven targeting of the fraudsters is the need of the hour. The data is being collected from Income Tax, Banks, Customs and necessary matching is being done to identify fraudsters and take action of suspension and cancellation after following due process of law. Precise targeting of fraudsters is being done only in specific cases, after doing a comprehensive analysis, using advanced data analytics tools. etc. Further, multiple risk indicators are checked and only then few high risk entities are selected. Action against fraudsters will not impact the Ease of Doing Business which is achieved in GST through liberal registration, refund regime and self-compliance system with little or no manual checks. 

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