CBIC Uncovers Rs. 36,374 Crore Fake ITC in FY 2023-24: 9,190 Cases Detected

By: Admin|July 30, 2024|Categories: CBIC|GST Law|Press Release

In a significant revelation, the Central Tax formations under the Central Board of Indirect Taxes and Customs (CBIC) uncovered a staggering Rs. 36,374 crore worth of fake Input Tax Credit (ITC) in the Financial Year (FY) 2023-24. This revelation was made by Union Minister of State for Finance, Shri Pankaj Chaudhary, in response to a query in the Lok Sabha on July 29, 2024.

Overview of the Issue

The detection of such a large amount of fake ITC highlights the persistent challenge of tax evasion through fraudulent means in the Goods and Services Tax (GST) regime. According to the data provided, 9,190 cases were identified in FY 2023-24 alone, indicating the widespread nature of the issue.

Historical Context

To understand the gravity of the situation, it’s crucial to look at the trends over the past few fiscal years. In FY 2022-23, CBIC detected Rs. 24,140 crore worth of fake ITC in 7,231 cases. The numbers have been steadily rising, underscoring the need for robust measures to combat GST fraud.

Measures Taken by the Government

In response to the growing incidence of GST fraud, the Government has implemented several measures aimed at curbing such practices. These initiatives are designed to enhance compliance, tighten regulations, and leverage technology for better enforcement. Here are some key steps taken:

  1. Biometric-based Aadhaar Authentication: Sub-rule (4A) in rule 8 of CGST Rules, 2017 now mandates risk-based biometric-based Aadhaar authentication for registration applicants deemed risky based on data analytics.
  2. Physical Verification in High-Risk Cases: Rule 9 of CGST Rules, 2017 has been amended to allow physical verification in high-risk cases, even after Aadhaar authentication.
  3. Bank Account Verification: Amendment in rule 10A of CGST Rules, 2017 requires the bank account furnished during registration to be in the name of the registered person and linked with Aadhaar in case of proprietorship firms. This aims to prevent misuse of ITC through fictitious entities.
  4. Restriction on Availment of ITC: There are now restrictions on availing ITC only on invoices and debit notes that are furnished by the supplier in their statement of outward supplies. This prevents fraudulent claims on non-existent or fictitious transactions.
  5. Mandatory Filing of GSTR-1 Before GSTR-3B: Filing of FORM GSTR-1 has been made mandatory before filing FORM GSTR-3B for a tax period, ensuring sequential and accurate reporting of GST transactions.
  6. Penal Action for Beneficial Owners: Beneficial owners are now liable for penal action and prosecution akin to actual suppliers/recipients in cases involving issuance of invoices without supply or misuse of ITC.
  7. Provisional Attachment of Property: Amendment in Section 83 of the CGST Act allows provisional attachment of property in cases where benefits of transactions have been retained by any other person.
  8. E-way Bill Restrictions: Non-compliant taxpayers are restricted from generating e-way bills, which is crucial for tracking the movement of goods and ensuring GST compliance.
  9. Lower Threshold for e-Invoice: The threshold for mandatory e-invoicing for B2B transactions has been reduced from Rs. 10 crore to Rs. 5 crore, effective from August 1, 2023. This facilitates real-time reporting and reduces the scope for fraud.
  10. Data Analytics: Regular use of data analytics is employed to identify risky GST registrations and track potential tax evasion patterns. This proactive approach helps in early detection and prevention of GST fraud.

Impact and Future Outlook

These measures collectively aim to strengthen the GST framework, enhance transparency, and reduce revenue leakages due to fraudulent activities. The detection and prevention of fake ITC not only safeguard government revenue but also promote fair competition among businesses.

Looking ahead, continuous vigilance, technological advancements, and policy refinements will be essential to stay ahead of evolving fraudulent practices. The Government’s commitment to tackling GST fraud underscores its resolve to ensure integrity and efficiency in the indirect tax system.

Conclusion

In conclusion, the detection of Rs. 36,374 crore worth of fake ITC in FY 2023-24 by CBIC highlights the ongoing challenges in GST compliance and enforcement. However, the proactive measures implemented by the Government, as outlined above, demonstrate a concerted effort to mitigate these challenges and uphold the integrity of the GST regime.

By leveraging technology, enhancing regulatory frameworks, and enforcing stringent penalties, the Government aims to create a tax environment that fosters compliance and deters fraudulent activities. These efforts are crucial for ensuring a fair and transparent tax system that supports economic growth and development.

For businesses and taxpayers, adherence to GST regulations and timely compliance remain paramount. By staying informed and compliant, stakeholders contribute to a sustainable and equitable tax ecosystem that benefits all.

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