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Campaign against Fake Invoice: GST Wing detects 252 Fake Invoices, unlawful ITC claimed upto Rs.491 Cr

Campaign against Fake Invoice: GST Wing detects 252 Fake Invoices, unlawful ITC claimed upto Rs.491 Cr

The Enforcement and Compliance Monitoring Unit of GST & Central Excise, Chennai Outer CGST Commissionerate, have so far detected 252 fake invoice cases, with an intention to pass illegal and unlawful Input Tax credit to the tune of Rs.491 Crore.

Fourteen persons have been arrested so far and further investigations are under progress. In order to create awareness regarding the economic impact of fake invoice menace, especially among tiny and small taxpayer’s / GST registrants, CGST Seva Kendra has launched a campaign against fake invoice. To make the inauguration of the campaign, handouts for creating awareness on fake invoice menace was released in both English and Tamil.

The handout was released by Shri. J. M. Kennedy, Commissioner of GST & Central Excise, Chennai Outer, in the presence of Shri P Anand Kumar, Commissioner of GST & Central Excise, (Appeals-II) and other senior officers. During the release, an Enforcement officer from State GST also participated.

Source: TaxScan. 

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Over Rs 2.06 trillion GST compensation to states due for April-November

Over Rs 2.06 trillion GST compensation to states due for April-November

The Centre has released Rs 84,000 crore till date to states under the special borrowing window to meet GST shortfall, while the provisional GST compensation due for April-November 2020 stands at over Rs 2.06 lakh crore, Parliament was informed on Monday.

Minister of State for Finance Anurag Singh Thakur, in a written reply in the Lok Sabha, said GST compensation of Rs 40,000 crore has been released to all states/Union Territories to meet partly the bi-monthly compensation for period April-May 2020 as the GST Compensation Fund was not adequate to meet the full compensation for the period.

The balance GST compensation for the period April-May 2020 and for the full period June-November’20 is pending to all states/UTs due to inadequate amount in the GST Compensation Fund during the current fiscal.

“In order to meet the shortfall in GST Compensation to be paid to States, under the special window, Rs 1.1 lakh crore will be borrowed by Government of India in appropriate tranches.

“The amount so borrowed will be passed on the States as loan on back-to-back basis to help the States to meet the resource gap due to non-release of compensation due to inadequate balance in the Compensation Fund… Central Government has released 14 installments of Rs. 6000 crore each to the States,” Thakur said.

A total of Rs 84,000 crore has been released to the states under the special borrowing window.

The provisional GST compensation due for fiscal 2020-21 (April-November) stands at Rs 2,06,461 crore.

The GST compensation released from July 2017 till date to all states together stands at Rs 3.37 lakh crore.

In response to a separate question on whether the government has received complaints against persons and companies regarding issuance of fake invoices to get benefit of Input Tax Credit (ITC), Thakur said 3,852 fake invoice cases have been booked during July 2017 to December 2020.

The quantum of ITC availed by fake invoicing cumulatively stood at Rs 35,620 crore, while 404 arrests have been made in this regard.

Source: Business-Standard. 


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GST authorities detect fraud of over Rs 214 cr

GST authorities detect fraud of over Rs 214 cr

An anti-evasion wing of Central-GST has detected a fraud of more than Rs 214 crore through fake invoices in Delhi, an official release said on Wednesday.

A person has been arrested and sent to judicial custody of 14 days, it added.

The fraud was detected by the anti-evasion wing of CGST Delhi South Commissionerate.

The alleged case of input tax credit fraud was taking place through fake invoices issued by bogus firms.

Investigations found the accused had also been generating bogus e-way bills to back the fake invoices, the finance ministry said in the statement.

“Over 35 entities are involved in the bogus transactions, involving fake invoicing to the tune of Rs 214.74 crore and tax evasion of Rs 38.05 crore,” it said.

Further investigations in the matter are in progress, the ministry said.

Source: Hindustan-Times

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Union Budget 2020: Fake invoicing under GST a non-bailable offence

Union Budget 2020: Fake invoicing under GST a non-bailable offence

In order to crack down on fake invoicing and fraudulent input tax credit (ITC) refunds under the goods and services tax (GST), the Budget has introduced strict penal provisions under the GST legislation, making it a non-bailable offence. The move has already been approved by the GST Council.

Besides, Finance Minister Nirmala Sitharaman announced that the new GST return framework and e-invoicing would be implemented from April 1, to improve compliance and plug the tax revenue leakages.

According to the government, the masterminds of fraudulent ITC rackets involve people like daily wagers, rickshaw pullers etc. As per the changes in the law, those fraudulently availing ITC without invoice or bill in cases where the amount of tax evaded or the amount of ITC wrongly availed or utilised or refund claimed worth over Rs 5 crore will be punishable with imprisonment for a term which may extend to five years and with fine and shall be cognizable and non-bailable.

“Further, the scope of Section 132 has been expanded by extending the provisions to a person who causes to commit and retains the benefits arising out of different offences,” said Abhishek
GST collections touched Rs 1.11 trillion in January, the second highest monthly collection since the roll out, the third straight month of GST receipts crossing the Rs 1-trillion mark.

“With an eye on the future of Indirect tax regime in India, this year’s Budget has aimed at simplification of tax compliances. New GST return framework and E-invoicing would be implemented from April 1, 2020, primarily in an attempt to plug the tax revenue leakage on account of fake invoicing and fraudulent claims of input tax credit,” said Anita Rastogi – Partner, Indirect Tax & GST.

Source: Business-Standard.

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DGGI directs to Block disputed Input Tax Credit against Fake Invoices, Invoices without Receipt of Goods or Services

DGGI directs to Block disputed Input Tax Credit against Fake Invoices, Invoices without Receipt of Goods or Services

The Directorate General of GST Intelligence ( DGGI ) has issued directions to all Zonal Chief Commissioners on Blocking of Input Tax Credit under rule 86A(1)(a) of CGST Rules.
Rule 86A.
Conditions of use of amount available in electronic credit ledger.-
(1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, has reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as
a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36-

b) issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or

2) without receipts of goods or services or both.

The DGGI directed that, All the Zonal Chief Commissioners have the facility to block/unblock ITC availed in a situation covered under Rule 86A(1)(a) of the CGST Rules, 2017 against fake invoices or against invoices without receipt of goods or services or both if such availed of credit are located in their jurisdiction.

The Chief Commissioners of each zone should appoint an officer of the rank of Dy. Commissioner/A.C., as a nodal officer, assisted by a few more officers, who should undertake this activity.

In a Communication issued to all Principal Commissioners of the State Department, the DGGI also directed that, all over India, should also make a Cell in their zone head office nominating one AD/DD rank officer as nodal officer assisted by a few other officers to block the credit of such avails received from their zonal CGST Chief Commissioner, who are located outside the jurisdiction of the concerned CGST Zone.

Source: Tax-Scan

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Govt to reopen FY17-18 GST accounts for fresh audit to check tax evasion, fake refund claims

Govt to reopen FY17-18 GST accounts for fresh audit to check tax evasion, fake refund claims

In a major enforcement drive, the government has ordered a fresh audit of FY17-18 GST accounts to check tax evasion, fake refund claims and credits. The government has started issuing Goods and Services Tax (GST) audit notices to taxpayers for financial year 2017-18, nearly three years since the launch of the indirect tax regime.

As per the tax notice issued by the taxman, the agency has invoked section 65 of the Central Goods and Services Tax (CGST) Act for an audit of accounts and records from July-March of 2017-18 or from the date of the last audit to FY18, CNBC-TV18 reported. The taxpayers have been asked to come with detailed records of related documents, with an immediate appearance in person with the taxman, as per the report.

As per the notices, the list of documents include GST forms, income tax papers, input service invoices, electronic cash/credit ledger, business agreements of sales and purchase, and other related documents.

The fresh audit will happen across the country during January and February 2020. Following this, the taxman will submit a report to the centre, including the list of tax evaders and fake refund claimants.

Earlier on Tuesday, a national level GST Conference was held in Delhi, where the Centre and States had joined hands to take necessary action to streamline the Goods and Services Tax system and plug revenue leakage. These measures include curbing fraudulent refund claims, linking foreign exchange remittances with IGST refund, investigation of fraudulent ITC cases by the IT department, a single bank account for foreign remittance receipt, and refund disbursement, among others.

Source: Business-Today

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FinMin notifies norm limiting ITC to 10% in case of GST details mismatch

FinMin notifies norm limiting ITC to 10% in case of GST details mismatch

In an effort to curb the menace of fake invoices and tax evasion, the Finance Ministry has notified a new norm of limiting the input tax credit to 10 per cent in case of GST details mismatch.

Experts feel that this will force businesses to restrict themselves to matched details and ignore the mismatched ones and thus incur losses, which could go into crores for big companies, due to complexities involved.

The change in the norm, the second in three months, has been initiated following a decision by the GST Council. Earlier, in October, the government limited ITC in case of details not uploaded by suppliers to 20 per cent which has now been halved. According to a new notification to be effective from January 1, ITC to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers, shall not exceed 10 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers.

Two return forms

Businesses take advantage of facilities provided under existing system to generate fake invoices that cause loss to the Government. The existing system prescribes assessees to file two return forms — GSTR 1 (outward sales with tax liability) and GSTR 3B (summary returns with final tax payment). Since both are not auto linked, this could result in showing higher liability, claiming higher input tax credit and paying less tax in cash.

In other words, irrespective of the credit being visible in GSTR 2A (auto generated return for purchases), the service recipient used to claim credit without any restriction subject to having the invoice copy and satisfying other conditions laid down under the law. There is feeling that one of the reasons for availing higher input tax credit on the basis of fake invoices was the mismatch between the two — GSTR 1 and GSTR 3B.

This was affecting the government’s revenue. This has forced it to limit the ITC in case of details not matched and encourages the companies to monitor whether the suppliers are uploading their returns on a regular basis. However, experts feel that such a mechanism will lead to compliance cost for companies. Also, the companies might not prefer to go behind suppliers to see whether they have filed returns or not. Hence, they would focus only on matched details and incur loss on account of others.

Electronic Credit Ledger

The government has introduced additional conditions for use of amount available in Electronic Credit Ledger. It has given the right to the tax authority to restrict the use of balance in electronic credit ledger by recording the reasons to believe in writing. The key reasons for restricting credit are: invoice issued by registered person not in existence and recipient is not in procession of goods/services /invoice on which credit is claimed. Post restriction, the tax authority, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, can allow such credit in the electronic credit ledger.

Controlling tax evasion

According to Harpreet Singh, Partner, one hopes that automatic blocking of credit is resorted to only where fraudulent intention is proved beyond doubt and the same is not used on a regular basis, as casual resort to the said provision may lead to harsh consequences for many innocent defaulters.

Rajat Mohan, Senior Partner, said GST frauds are on the rise and so is the fiscal deficit which is forcing the government to introduce new methods to control tax evasion and take punitive action against the accused.

Source: The-Hindu-Business-Line

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GST trouble: Businesses reporting 20 per cent revenue fall receive notices

GST trouble: Businesses reporting 20 per cent revenue fall receive notices

GST-registered businesses that have reported decline in annual revenue by 20% or more over the previous year have received a flurry of notices over the last few weeks from the tax department, sources in the know told FE. While notices related to mismatch in declaration between GSTR-3B (summary return) and GSTR-1 (outward supplies detail) were common earlier, the department is now comparing firms’ earning under GST with that of erstwhile service and excise regime.

The notices have asked businesses to produce relevant documents and explain the reasons for decline in sales. The department believes that many such cases could point to possible evasion under the new indirect tax regime. Sources said that the government is sitting on a pile of data that wasn’t available to them before GST. This is further aided by integration of information from Customs and direct tax department. The GST IT system is now throwing up many red flags when tax returns under different tax regimes are compared.

However, the spate of notices are also targeting businesses that have genuine reasons for declining revenue which includes a slowing economy. In one instance, a service provider for multinational companies received a notice but its revenue had slacked due to expiry of certain contracts. In another notice seen by FE, the taxpayer was asked to produce input tax credit documents as it had paid a substantial portion of tax liability through accumulated tax credit.

“While genuine businesses are not worried over these notices, it does raise the cost of doing businesses for them,” Rajat Mohan, partner at AMRG & Associates, said. He explained that replying to notice under GST requires professionals and could cost as much as `1 lakh while earlier, the tax laws had been around for some years and most replies followed a set pattern that didn’t require professional intervention.

Although the GST system generates a lot of data to track evasion, the absence of a full-fledged return system means that there are areas prone to exploitation through fake invoices for claiming additional credit and bringing down tax liability. The Comptroller and Auditor General’s (CAG) report tabled in Parliament recently pointed this out. The new return system is likely to come into force only from next year.

Meanwhile, tax department has estimated that evasion worth as much `1.2 lakh crore may have taken place under GST regime. An official said that while the government had detected evasion worth over `12,000 crore since GST came into force two years ago, rule of thumb suggested that such detection were only 10% of the actual evasion taking place. The GST collection for central government in FY19 fell short of target by over `60,000 crore.

This prompted the government to set relatively modest budget estimate for the current fiscal at `11.89 lakh crore. This translates into an average monthly collection of just below `1 lakh crore. In the first four months of FY 20, the collection have kept pace with the required rate.

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Source: Financial-Express.
Delhi government cancels GST registration of 1,282 traders for fraud

Delhi government cancels GST registration of 1,282 traders for fraud

The Delhi government has cancelled the GST registration of 1,282 traders who were found to be involved in the issuance of fake invoices. In addition, “show cause notices for cancellation have been issued to 3,221 dealers, of which proceedings are still underway​,” a government statement said on Wednesday. ​

The department has directed its tax officers to recover the entire amount of tax, interest and penalty from such dealers as well as to take other legal action against them.

Following directions from Deputy Chief Minister and Finance Minister Manish Sisodia, the Department of Trade and Taxes has identified around 56,000 suspicious​ and ​risky dealers on various risk parameters.

Sisodia reviewed the situation twice in the last one month and ordered strict action against them. The Department, through GST ​inspectors, has conducted ​field verification and inspection of 16,141 suspicious dealers so far. Of them, 4,618 dealers were found to be non-existent​ and ​bogus.

​“These dealers are non-existing/bogus dealers who got registration in GST to defraud the government exchequer by issue and use of fake invoices.​ ​A large number of GST fraud cases involving the use of fake invoices for wrong availment of input credit, which is further used to pay GST on outwards supplies has been detected​,” read the statement. ​

“​The purpose of use of such fake invoices is the fraudulent availment/encashment of input tax credit. The bogus entitles engaged in this activity also defraud other authorities such as banks by deflating turnovers, laundering of money etc.​,” it stated.​

The unscrupulous​ and ​bogus entitles engaged in such activities do not undertake actual trading of goods or services but involve in only paper transactions without physical delivery of goods​ and ​services​, the government noted. After their identification, assistant commissioners and GST officers from the department are taking action against the dealers in accordance with the provisions of GST Act and Rules.

Source: New-India-Express.

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