On 18th November a panel of officials attached to the Goods and Services Tax (GST) Council will discuss further tightening of the way GST registration is issued to businesses to check tax evasion.

The law committee of the Council will thrash out amendments to the GST law needed to prevent frauds involving fake invoices. Law committee is a panel of central and state officials which examines legal aspects of GST before Council members consider it.

The urgent meeting of the panel has been called as the government is on a drive to check the menace of fake invoices, which are rampantly used to evade taxes. In GST, the value added at each stage of the supply chain is subject to tax and credit for the same is offered to the next entity in the supply chain. 

The central and state authorities are working in close coordination. These enable the authorities to find discrepancies and nail evaders by analysing tax returns and invoice details. The authorities are now leveraging the new indirect tax system’s potential to improve tax compliance after the three-year transition period during which the focus was to hand hold businesses.

In the last few days, the Directorate General of GST Intelligence (DGGI) has arrested 25 persons including two professionals and booked 350 cases against persons involved in abusing the tax credit system.

Fake invoices are used in frauds like evasion of GST and income tax, diversion of funds from companies and manipulating books to obtain loans from banks.

The idea is to ensure only genuine businesses get GST registration expeditiously. But the businesses, the owners of which do not have commensurate financial track record like filing income tax returns and paying taxes, may require detailed physical and financial verification by tax officers, before their companies can be considered for GST registration. Provisions related to deemed registration under GST law may also be tightened to prevent misuse.

Process of suspension and cancellation of GST registration will also be streamlined. Investigations show that fake invoices are issued rampantly in the case of items such as metals, plastic granules, readymade garments, gold and silver, construction services, work contract services, agro products, manpower supply and advertisement and animation services.