GST Special All-India Drive Against Fake Registrations

There have been several taxpayers misusing the identity of other persons to obtain fake registrations under the GST law. These registration have been obtained with the intention of defrauding the government by issuing invoices to pass on input tax credit without any supply of goods or services. The fake GST registrations have been obtained through forged documents and identify fraud. This has resulted in huge revenue losses to the government. 

In order to put an end to this, the government has launched a two-month all-India drive against fake GST registrations. Here’s what taxpayers must know.

About the all-India drive against fake GST registrations

The CBIC released a set of instructions in May 2023 stating that a special all-India drive would be conducted to identify GST registrations that have been obtained fraudulently. So far, there have been system-based and policy measures in place to address the problem. However, there has been no coordinated effort between the Centre and the state to tackle this issue in a systematic manner. 

Hence, the new all-India drive on a nationwide level has now been launched to detect any suspicious or fake registrations and to conduct requisite verifications wherever necessary. This will result in timely remedial action that will prevent any further revenue loss to the government. 

How will fake GSTINs be identified?

The GSTN will run detailed data analytics and risk parameters to identify fraudulent GSTINs. Next, the GSTN will share the details of such identified suspicious GSTINs, jurisdiction-wise, with the concerned Central or state tax administration authorities for initiating a verification drive and taking necessary action wherever required. 

Besides the above, there will also be field formations to supplement this list by the use of various analytical tools, such as BIFA, ADVAIT, NIC Prime, e-way analytics, etc., as well as through human intelligence, the Aadhaar database, and other local learnings and modus operandi alerts. BIFA stands for the Business Intelligence and Fraud Analytics unit by the GSTN, while ADVAIT refers to Advanced Analytics in Indirect Taxation. The GSTN may separately issue a note to the field formations regarding the tools available in BIFA, that they may find useful during this drive.

When will the drive be conducted?

The special All-India drive will be conducted by the Central and state tax administrations over a two-month period between 16th May 2023 and 15th July 2023.

How will the information be shared?

In order to successfully implement this special drive, it would require close coordination between the Central and state tax administrations. For this purpose, each CGST zone and state will appoint a nodal officer to ensure the seamless flow of data as well as for coordination with the GSTN, Directorate General of Analytics and Risk Management (DGARM), and other tax administrations. 

The name, designation, mobile number and e-mail ID of these Nodal officers appointed by the CGST zones and the states must be shared by the concerned tax authority with the GST Council Secretariat within three days. The secretariat will thereafter compile the list of the Nodal officers and make the same available to all the tax administrations, the GSTN and the DGARM immediately.

The Nodal officers will also ensure that the data received from GSTN/DGARM/ tax administrations is provided to the concerned jurisdictional formation within two days and also ensure prompt cooperation by the other jurisdictions under their control.

What action will be taken by the GST officers on the detection of fake GSTINs?

On receipt of data from the GSTN/DGARM or through the Nodal Officer, a time-bound GSTIN verification exercise will be conducted by the concerned jurisdictional tax officer. Post verification, if it is found that the taxpayer is fictitious and non-existent, then the tax officer may immediately undertake one or more of the following actions-

• Initiate the suspension and cancellation of the GST registration of the concerned taxpayer in accordance with the provisions of Section 29 of the CGST Act. 
• Examine if input tax credit in the electronic credit ledger will need to be blocked as per the provisions of Rule 86A of the CGST Rules.
• Identify the recipients to whom the input tax credit has been passed by such a non-existent taxpayer through the details furnished in the GSTR-1 by the said taxpayer.
• Take suitable action for demand and recovery of the unlawfully availed input tax credit where the recipient GSTIN pertains to the jurisdiction of the said tax authority. In other cases, the details of the case, along with relevant evidence, may be sent to the concerned tax authority through the Nodal Officer in the specified format.
• Identify the masterminds or beneficiaries behind such fake GSTINs and take further action, where ever required, and initiate recovery proceedings such as provisional attachment of property, bank accounts, etc., as per the provisions of Section 83 of the CGST Act. 
• Take suitable action where, during the investigation/verification, a linked suspicious GSTIN  has been detected.

An “action taken” report will need to be provided by each state as well as CGST zone to the GST Council Secretariat each week, on the first working day after the completion of the week. If any novel modus operandi has been detected during the verification/investigation, then the same needs to be indicated in the “action taken” report. 

On the conclusion of the drive, GSTIN-wise feedback on the result of the verification of the suspicious GSTINs will be provided to the GSTN/DGARM by the field formations.

Relevant forms for intimations and reporting 

The CBIC has released three new annexures for the purpose of intimations and reporting with regard to this special verification drive. In cases where the recipient GSTIN pertains to a different tax jurisdiction, then the details of the case along with the relevant evidence will be sent by the Nodal Officer to the concerned tax authority in Annexure-B. 

Each state as well as CGST zone will be required to send to the GST Council Secretariat an “action taken” report. The same will need to be sent out on a weekly basis on the first working day in Annexure-A. Further, if any novel modus operandi has been detected during the verification or investigation, then the same may also be indicated in the said action taken report. 

Once the drive has concluded, then GSTIN-wise feedback on the result of the verification of the suspicious GSTINs will need to be provided by the field formations to GSTN/ DGARM in Annexure-C.

Role of the National Coordination Committee

A National Coordination Committee will be set up to monitor the progress of this special drive and will meet periodically for this purpose. The GST Council Secretariat will act as the secretariat of this National Coordination Committee. The Committee will be assisted by GSTN and Principal Commissioner, GST Policy Wing, CBIC.

The GST Council Secretariat will compile the reports received from various formations and make them available to the National Coordination Committee with immediate effect.  The unique modus operandi found during this special drive will be compiled by GST Council Secretariat and presented before the National Coordination Committee. The same will be subsequently shared with the Central and state tax administrations across the country.