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Govt Launches Crackdown on 7,000 GST Evaders; 185 Arrested

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Armed with data analytics and information from agencies, the government has launched a massive crackdown on GST evaders, initiating action against 7,000 entities including arrest of 187 — a campaign that contributed to buoyancy in tax collection, Finance Secretary Ajay Bhushan Pandey said on Sunday. The government netted a record GST collection of Rs 1.15 lakh crore in December 2020, helped by the action against tax evaders alongside pick up in the economy.

In an interview to PTI, Pandey said action against fake invoicing racket in last one- and-a-half months has led to arrest of 187, including five chartered accountants and one company secretary. “Many of them including some managing directors are in jail for last 40-50 days. There are few large companies which too are found involved in taking fake bills through multiple layers, thereby evading GST and income tax. So they have also been booked,” he said.

The action against those who try to misuse the system, he said, has been based on collating information from various agencies such as Income Tax Department, Customs unit, FIU and GST department and banks. “We have taken action against 7,000 evaders out of a tax base of 1.20 crore. Hence our success rate is very very high, said Pandey, who is also the Revenue Secretary.

He said the Income Tax Department immediately follows up on all the cases booked under GST fake invoice because the tax implication is higher. “Because of the data available, it is very very difficult to escape because sooner or later they will get caught,” he said.

The secretary said from April 1,e-invoice would be made mandatory for all B2B transactions by businesses with turnover of over Rs 5 crore. Electronic invoice was made mandatory for B2B transactions by businesses with turnover over Rs 500 crore from October 1,2020, and for over Rs 100 crore turnover from January 1.

Pandey said the provision restricting usage of input tax credit (ITC) is an anti-abuse provision and targets shell companies. “We have found many shell companies which are issuing invoices worth crores of rupees and not paying income tax and paying the entire liability through ITC. So in order to ensure that these companies are not able to abuse the system, this particular anti-abuse provision has been put in and this will impact less than 45,000 units in the entire tax base of 1.2 crore,” he said.

After unearthing a rampant fake invoicing scam to evade goods and services tax (GST), the Central Board of Indirect Taxes and Customs (CBIC) amended rules making it mandatory for businesses with monthly turnover of over Rs 50 lakh to pay at least 1 per cent of their GST liability in cash from January 1. The new rule restricts use of input tax credit (ITC) for discharging GST liability to 99 per cent.

GST collections surged to an all-time high of over Rs 1.15 lakh crore in December as economic activities picked up after lifting of stringent lockdown restrictions. GST, which is levied when a consumable item is sold or a service is rendered, in December was 12 per cent higher than such receipts in the same month of 2019.

Pandey said December has seen record collection since GST implementation, which can be attributed to two factors. “The trend suggests that the economy is picking up and we are seeing faster pace of recovery”. “Also the measures like e-invoice, pre-population of information on supplier wise input tax credit, which deter those who are trying to claim excess ITC, are helping compliance. against tax evaders by way of full data analytics, it is possible to pinpoint the entity which issued fake bill and also the ultimate beneficiary,” he added.

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