Investigation on 1.25 lakh entities for fake GST ITC to continue till December: Official

CBIC plans to also take a review meeting of the investigations with central and state GST officials.

The Goods and Services Tax (GST) authorities are likely to continue the follow-up investigations on over 1.25 lakh entities till December to plug revenue leakages, a senior government official told Moneycontrol on September 15.

These investigations relate to fake input tax credit (ITC).

ITC allows GST taxpayers to claim credit for taxes paid on inputs used in the production of goods or services. Fake invoicing means invoices are issued even when there is no real supply of goods or services. These invoices are then used to avail ITC, which causes a revenue loss to the government.

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The fake credits detected in the first special drive were to the tune of Rs 63,000 crore.

“The revenue department is doing follow-up investigations now. This is after the first stage of the special drive. Now, we have to check to whom the supplies of the fake ITCs were made. References are being made to verify level 1 and 2 of the fake ITC chain,” the official said.

The Central Board of Indirect Taxes and Customs (CBIC) had initially carried out a two-month special investigation from May 14-July 14, in which 77,200 entities were verified. Out of these, 20,800 were found to be bogus.

“Originally 77,200 entities were identified as risky, and follow-up investigations were done on more than 1.25 lakh entities,” he said.

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This — the 1.25 lakh companies — is the second layer of the probe. The 1.25 lakh companies are spread across India. Some of them may be non-existent and fake. But many of them are government agencies and reputed companies, another senior government official had told Moneycontrol earlier.

The Centre and states are jointly working on the follow-up investigation drive. For example, a bogus entity, based in Delhi, is supposed to have supplied five companies based in Madhya Pradesh, Bihar, Chhattisgarh, etc. So, all five companies are now being probed by the state tax administrations.

“This follow-up investigation will continue till CBIC verifies all the entities which received the supply of fake bills. It may go on till December end. In the follow-up, if the authorities come across more companies, the investigation will go to the level two in the supply chain,” he said.

CBIC plans to also take a review meeting of the investigations with central and state GST officials, he added.

Meanwhile, the adjudication of the findings of the special drive is ongoing. The authorities will derive liabilities based on evidence.