CBIC identifies 12,500 bogus entities so far in special drive against fake ITC: Vivek Johri

The GST Council in its meeting on July 11 will be apprised of the outcome of the special drive which will continue July 15.

As many as 12,500 entities, mostly in the metal scrap and manpower supply services sectors, have been found as bogus out of the 50,000 verified so far in the special drive against fake input tax credit (ITC) which will continue till July 15, CBIC Chairman Vivek Johri said.

“The special two-month drive being done jointly by Center and states identified 60,000 units as risky, out of which 50,000 verifications have been done so far. As much as 25% of these were found as bogus,” Johri told reporters as Goods and Services Tax completes six years of implementation.
The GST Council in its meeting on July 11 will be apprised of the outcome of the special drive which will continue July 15.

“We will decide after that if the drive will be continued or will be paused for some time. Taxpayer base which is not clean is not desirable. Way forward is that we will continue to go aggressively after the bogus entities,” he said.
The fake entities have been mostly found in sectors of metal scrap, plastic waste, paper waste, manpower supply services and advertising. The fake locations of these entities were registered in areas of Delhi, Haryana, Rajasthan, Gujarat, Noida in Uttar Pradesh, Kolkata, Assam, Telangana, Tamil Nadu and Maharashtra, Johri said.

The Central Board of Indirect Taxes and Customs (CBIC) has been conducting checks against bogus entities from August 2020 from time to time.

The CBIC Chairman said the focus on preventive measures so far and depending on the outcome of the special drive, the tax department may decide if punitive measures are needed.

“So far, an overall fake ITC of Rs 63,000 cr has been detected till now. Recoveries are difficult because they're fake. Recoveries are time consuming and slow as we have to identify the beneficiary. So far we have recovered Rs 3,000 cr,” he said.

When these bogus firms are created, either they steal somebody’s identity like PAN and Aadhaar as a modus operandi. Then they take GST registration and look for buyers who buy that firm or start generating fake invoices. Another modus operandi is that they give some small payment to people to part with their identity documents to create bogus firms.

The government now using data analytics and multiple parameters are being used in identifying fake firms.

“We watch the behaviour of new firms, look for their history of past payments. We have very advanced analytics using which we look at their income tax footprints. There are many giveaways and based on analytics we are able to identify these firms as some addresses are used for generating fake firms. The typical behaviour is that they issue a very large number of invoices when they start and then they become dormant. The return filing system has already been tightened. With the change in law, fraudsters are able to claim fake invoices only for one month as we have prescribed in law that all returns must be filed sequentially. If a firm does not file GSTR3b for a month, it cannot file GSTR1 next month. So the ability to issue fake invoices is confined to one month,” he explained.