Fraudulent GST input tax credit claims and fake invoices have become a headache not only for the tax administration but also for taxpayers. GST input and Refund frauds become a concern for CBIC.
CBIC Block Refunds
The Central Board of Indirect Taxes and Customs (CBIC) have blocked GST input tax credit of more than 2000 companies. It has obstructed around Rs 40,000 crores in the name of fake invoices. The data authentication in the department reported a mismatch in filing and returns. Speaking at International Customs Day, CBIC chairman John Joseph, said that the action is in line with directives. Further, the department found cases of GST input credit demand by the buyer when the supplier has not uploaded any invoice. The move will help the government to reduce fake invoice claims.
Small Business Suffer
The decision has disappointed small traders and exporters who have been expecting GST input tax credit. Further, the revenue department linked its income tax return with the indirect tax return and put them under scrutiny. A senior CBIC official accused small traders and exporters of evading tax returns by faking invoices. The department has sent notices for tax discrepancy cases. However, small businesses stated that the officials have not screened documents properly. Further, they complained that though their turnover is large, their profit share remains small and they end up paying huge GST.
Reasons for Failure
Administrative measures play an important role in checking tax evasion. The tax evasion has grown to a large extent since the GST roll out. Further, failure in technology assists evaders to cover the modus operandi. Also, the number of bogus firms is on a rise which claims GST input tax credit fraudulently. Several non-identifiable entities use random PAN numbers to claim GST input credit through fake invoices. Besides, there were some instances where exporters claimed huge cash refunds but paid a negligible amount of tax. In addition, there were several claims under the inverted duty structure where tax paid on GST input is greater than on the final output.
In all, though the government initiated GST to unify the country into a common market, tax evasion continues.