Special All-India Drive Against Fake GST Registrations| CBIC Instructions

Fake Invoices, i..e, raising invoices without any underlying supply of goods or services for sole purpose of passing on fake ITC, and Fake GST Registration has become a major trouble under GST. This practice is causing huge revenue losses to the government. People are obtaining registration in the name of any random person such as a servant, watchman or any other person and are issuing fake invoices from such GSTIN.

Cases involving thousands of crores of GST evasion have been unveiled by the GST department in the last few months. As per GST official, GST evasion detected by tax officers has been doubled to INR 1.01 Laks during FY 2022-23. Therefore, CBIC is taking all the steps to identify such taxpayers and corresponding parties who have taken fake ITC and taking action against them. 

In line with the same, the Central Board of Indirect Taxes and Customs (CBIC) has launched a special all-India drive to combat the rising menace of fake Goods and Services Tax (GST) registrations and the fraudulent passing of input tax credit (ITC). 

The drive aims to identify and take action against fake dealers and billers and eliminate individuals and entities involved in fraudulent GST registrations, which have been causing significant financial losses to the government, and protect government revenue by preventing losses caused by fake registrations and ITC fraud.

1. Requirement of Identification of Fake GST Registration

• National Coordination Meeting of the State and Central GST officers discussed the issue of unethical use of the identity of other persons to obtain fake/ bogus registration under GST. Such GST registrations are obtained with the intention to defraud the Government.

• Fake/ non-genuine registrations are being used to fraudulently pass on input tax credit by issuing invoices without any underlying supply of goods or services. 

• This menace of fake registrations and issuance of bogus invoices for passing of fake ITC has become a serious problem. 

• To identify such fake GST registrations, CBIC has initiated a special drive with the State Government. For this purpose, CBIC (Policy Wing) has Issued detailed guidelines for a special All-India drive against fake GST registration vide Instruction No. 01/2023-GST dated 4th May, 2023.

2. Modus operandi of obtaining such fake GST registrations 

In recent years, Central and State Tax administrations have detected various modus operandi of obtaining fake GST registrations. Following are some of the methods used to obtain fake GST registrations:

1. Use of Forged Documents: Fraudsters use forged documents, such as forged electricity bills, property tax receipts, rent agreements, etc. as proof of principal place of business to obtain GST registration.
2. Use of PAN and Aadhaar Number of Persons from Economically Weaker Sections: In some cases, fraudsters obtain fake GST registrations by using the PAN and Aadhaar numbers of persons from economically weaker sections without their knowledge.

Recently, a case was detected by Gujarat State Tax authorities wherein fraudsters obtained GST registrations by using Aadhar Card of unsuspecting individuals. They linked their Aadhar Cards to a dummy mobile number by taking these individuals to the nearest Aadhaar Seva Centre by giving a nominal cash amount under the guise of a government scheme.

3. Guidelines for the Special All-Drive for identification of fake Invoices

In the Meeting, apart from regular action on fake GST invoices and fake GST registrations, there is a need for concerted and coordinated action by Central and State tax authorities to tackle this menace in a more systematic manner. 

Therefore, it was decided to carry out a nation-wide Special Drive on an All-India basis to detect suspicious/fake registrations and to conduct requisite verification for timely remedial action to prevent any further revenue loss to the Government. 

Accordingly, CBIC has issued following common guidelines to ensure uniformity in the action by the field formations and for effective coordination and monitoring of the action taken during this Special Drive. 

3.1 Period of Special Drive

A Special All-India Drive to detect suspicious and fake GSTINs may be launched by all centre and state tax administrations from 16th May 2023 to 15th July 2023.

3.2 Identification of fraudulent GSTINs

1. GSTN (Goods and Services Tax Network) will use detailed data analytics and risk parameters to identify suspicious GSTINs that are potentially involved in fraudulent activities.
2. Once identified, GSTN will share the information about these suspicious GSTINs with the respective State and Central Tax authorities. In the case of Central Tax authorities, this information will be shared through the Directorate General of Analytics and Risk Management (DGARM).
3. The concerned tax administration will initiate the verification drives and take necessary actions based on the information provided.
4. Further, Field formations, which include local tax offices and enforcement agencies, can also contribute to the identification of fraudulent GSTINs. They can conduct their own data analysis using various available analytical tools like BIFA, ADVAIT, NIC Prime, and E-Way Analytics. 
5. Additionally, human intelligence, Aadhar database, local knowledge, and past detection experiences can also be used to supplement the identification process.
6. GSTN may provide a separate note to field formations, informing them about the tools available in BIFA (Business Intelligence and Fraud Analytics) that can be helpful during the verification drive.

3.3 Information Sharing Mechanism

1. To ensure the successful implementation of the Special Drive and facilitate coordination among tax administrations, it is recommended to appoint nodal officers at both the Zonal CGST Zone and State levels. 
2. These nodal officers will be responsible for ensuring the smooth flow of data and coordination with GSTN, DGARM, and other tax administrations. 
3. The following details should be shared of Nodal officers with the GST Council Secretariat within 3 days of receiving this letter:

• Name
• Designation
• Phone number or mobile number
• Email address

4. GST Council Secretariat will compile the list of the Nodal officers after procuring the details from all the tax administrations and will make the compiled list available to all the tax administrations, as well as GSTN and DGARM immediately
5. The Nodal officer will ensure that the data received from GSTN/ DGARM/ other tax administrations is made available to the concerned jurisdictional formation within 2 days positively. 
6. The Nodal officer shall also ensure that any cooperation required by other jurisdictions under his control is promptly provided.  

3.4 Action by Jurisdictional Tax Officer

• Upon receiving data from GSTN/DGARM through a nodal officer, the concerned jurisdictional officer shall carry out the verification process in a time-bound manner.
• The proper officer will undertake the following actions:
  • Suspension and Cancellation of Registration: The taxpayer is found to be non-existent or fictitious, the proper officer will initiate action for suspension and cancellation of such GST registration.
  • Block Input Tax Credit (ITC): Blocking of input tax credit in Electronic Credit Ledger as per the provisions of Rule 86A of CGST Rules without any delay.
  • Identification of Fake ITC Recipients: Identifying Recipients of Fraudulent ITC means The details of recipients who have received input tax credit from the non-existing taxpayer will be identified through the details furnished in FORM GSTR-1 by the said taxpayer.
  • Action against Recipients (Falling under same jurisdiction): If the recipient GSTIN belongs to the same jurisdiction, suitable action may be initiated for the demand and recovery of the input tax credit wrongly availed by the recipient. 
  • Action against Recipients (Falling under different jurisdictions): In cases where the recipient GSTIN belongs to a different tax jurisdiction, the tax officer should gather all relevant details and supporting documents/evidence. This information should be compiled and sent to the concerned tax authority through nodal officers at the earliest.

Sending officer shall share the following information with Tax authority of the recipient in Annexure-B:

1. GSTIN of the nonexistent supplier, along with Name & Address
2. GSTIN of the recipient
3. Name & Address of the recipient(s)
4. Tax Amount/ ITC involved (in Rs Lakhs) 

• Identifying Masterminds/Beneficiaries: Action may also be taken to identify the masterminds/ beneficiaries behind such fake GSTIN for further action, where ever required. Further, necessary action will be taken for recovery of Government dues and/ or provisional attachment of property/ bank accounts, etc. as per provisions of section 83 of CGST / SGST Act
• Action against linked suspicious GSTIN:  During the investigation or verification process, if any linked suspicious GSTIN is detected, similar action may be taken or initiated to address the associated entities involved in fraudulent activities.

3.5 Feedback and Reporting Mechanism

An action-taken report will be provided by each State and CGST Zones to the GST Council Secretariat on a weekly basis. Novel modus operandi detected during the verification process will also be reported.

3.6 National Coordination Committee

A National Coordination Committee headed by Member [GST], CBIC, and including Principal Chief Commissioners/ Chief Commissioners Delhi and Bhopal CGST Zones and Chief Commissioners/ Commissioners of State Tax of Gujarat, West Bengal, and Telangana shall monitor the progress of this special drive.

4. Action to be taken by Taxpayers

Under this drive, a massive physical verification of the place of business to be carried out by Field officers. Verification can be carried out at places of both genuine and fake registered persons. Therefore, GST-registered persons are required to make a note of following points to avoid any adverse action :

1. Display name board containing details of name, Address, GSTIN of registered person at entry gate of the principal place of business and every additional place of business. (Rule 18(2) of CGST Rule, 2017). 
2. Display GST registration certification at prominent locations at principal place of business and additional place of business. (Rule 18(1) of CGST Rules, 2017).
3. Keep the Following documents ready for verification:
   1. KYC: PAN & Aadhar of Proprietor, Partners or Directors
   2. Address proof: Rent Agreement, Electricity Bill, NOC etc. as per applicability.

4. Ensure that all additional place of business are already registered under GST. Registered person is not allowed to procure, sale or store goods at any location which is not registered under GST.]
5. In case multiple businesses are registered at the same premises, clear demarcation is created to identify the space of every business. 
6. GSTR-1 and GSTR-3B are filed upto date.
7. If a business is not carried out anymore, necessary action has been taken for cancellation of GST registration.
8. Complete books of accounts are maintained at the principal place of business and Sales Invoices and Purchase invoices should belong to the registered person of such premises only.