CBIC's second drive against fake input tax credit unearths Rs 26,543-cr GST evasion: Sources

In states like Maharashtra, Gujarat and Delhi, maximum cases of evasion have been reported

The Central Board of Indirect Taxes and Customs (CBIC) has uncovered a GST evasion of Rs 26,543 crore in its second nationwide drive against fake input tax credit (ITC). From August 16, the CBIC officials scrutinised 68,903 high-risk taxpayers, out of which 18,472 entities — nearly 27 percent — were found to be non-existent, according to sources in the GST Council.

“The evasion detected in the second drive is a huge amount of Rs 26,543 crore. Almost 27 percent of entities were found bogus. In states like Maharashtra, Gujarat and Delhi, maximum cases of evasion have been reported,” one of the sources told Moneycontrol.

Despite the large amount of tax evasion detected, recovery remains a challenge. “In many cases, the ITC is utilised before the fraud is discovered,” he said. “This limits the scope of recovery, even though the quantum of fraud averages Rs 1.5 crore per fake entity.”

The findings of the second drive will likely be presented in the GST Council meeting on December 21. The Council is expected to deliberate on measures to strengthen GST compliance and further tighten regulations against fake invoicing and ITC fraud, a second source told Moneycontrol.

Pending Verifications

Out of the initial list of 74,070 taxpayers flagged as risky, about 5,000 remain to be verified, primarily from Delhi and Maharashtra. Maharashtra accounts for 765 pending verifications, while Delhi alone has 3,300 cases yet to be investigated. “The delay in Maharashtra is likely due to the state elections,” the person noted.

The list of risky taxpayers was provided by the GST Network (GSTN), with states supplementing it using local intelligence. “GSTN had flagged risky taxpayers, and states had the liberty to add to the list based on local intelligence,” he added.

This is the second major operation against fake ITC frauds following the success of the first drive. The CBIC had initially carried out the first two-month special investigation from May 14 to July 14, in which 77,200 entities were verified. Out of these, 20,800 were found to be bogus.