Wrongful availment of input tax credit (ITC) or fake ITC claims has emerged as a major cause of concern for Goods and Services Tax (GST) authorities amid continuing action against frauds, evasion and registration of bogus entities under the indirect tax regime.
A total of 1,999 cases have been booked for fake input tax credit (ITC) claims in India in the ongoing financial year 2023-24 (till January), involving amount of Rs 19,690 crore. The highest number of cases were registered in Gujarat, West Bengal, Haryana, Assam, Rajasthan, Maharashtra, Karnataka and Delhi, as per data viewed by The Indian Express. The amount involved in fake ITC claims in FY24 (till January) is 49 per cent higher than Rs 13,175 crore detected in 1,940 cases in FY23.
Even though the number of fake ITC cases of GST have been the highest in Gujarat and West Bengal among 34 states/ union territories, in terms of value detected, Haryana and Delhi stood at the top with an amount of Rs 10,851 crore, the data showed. Haryana and Delhi together account for 55 per cent of the total amount of Rs 19,690 crore detected in the fake ITC claims under GST in the current financial year, even though their share in number of cases is much less at 14.5 per cent.
Incidentally, the number of fake ITC cases booked have been lower than previous year in 10 states/union territories (UT), including Gujarat and Haryana, while the number of fake ITC cases booked have doubled in 2023-24 from the previous year in seven states/UTs including Delhi (an increase of 150 per cent), West Bengal (134 per cent) and Telangana (228 per cent).
The total fake ITC cases of GST this year involved detection of an amount of Rs 19,690 crore in 2023-24 (till January), nearly 50 per cent higher than Rs 13,175 crore detected in the previous financial year 2022-23. This data pertains to the cases booked by Directorate General of GST Intelligence (DGGI) and does not include cases of central GST (CGST) and state GST (SGST) authorities. In 2022-23, about 1,940 cases of fake ITC were booked by DGGI, involving detection of an amount of Rs 13,175 crore.
“We are better performing than last year in terms of catching evaders. But whatever we are catching is still miniscule because this problem of fake ITC is quite severe. In the initial phase of the GST implementation, there wasn’t much action taken by enforcement agencies and it was more about facilitation. Many people entered into this fake ITC during that period.
On the registration front, many changes such as bank and address validation have been made to ensure that the registration route for bogus entities gets tightened. The cycle of fraud has also reduced with firms not being able to continue taking fake ITC with sequential filing of returns. But, fake ITC is the main agenda. We are specially targeting masterminds,” a senior government official told The Indian Express.
The GST fraud cases involving the use of fake invoices for wrong availment of ITC usually involve fake invoices that are raised by an entity without actual supply of goods or services or payment of GST.
Another modus operandi of GST fraud has been seen through routing of invoices through a series of shell companies/dummy companies and transfer of input tax credit from one company to another in a circular fashion to increase the turnover.
“Most number of cases of the fake ITC availment are being seen in Delhi, Haryana, Rajasthan and Uttar Pradesh. Several sectors especially construction, metals, tiles, marbles have seen such cases of fake ITC along with cases of services sectors including insurance and pharma sectors, or manpower supply services to many sectors. It is being detected everywhere including big businesses involved with industry chambers. We are using various analytical tools, and if somebody is gaming the system, then we catch them,” the official cited above said.
The recovery rate is slow as cases take some time to be fully probed and in many cases, the evaders and masterminds of such fake ITC claims are tough to be traced, officials said. In those cases, then, the aim is to curb the cycle of the fraud, they said.
In 2023-24, out of the total Rs 19,690 crore detected in fake ITC cases, 105 persons were anrrested and Rs 2,504 crore has been recovered. Out of the total Rs 13,175 crore detected in fake ITC cases in 2022-23, 68 arrests were made and Rs 1,597 crore was recovered by the DGGI.
Separately, Central GST zones had recorded 6,303 cases of fake ITC in 2022-23, involving detection of Rs 10,965 crore, for which 85 persons were arrested and Rs 887 crore was recovered.
In 2023-24, out of the total Rs 19,690 crore detected in fake ITC cases, 105 persons were anrrested and Rs 2,504 crore has been recovered. Out of the total Rs 13,175 crore detected in fake ITC cases in 2022-23, 68 arrests were made and Rs 1,597 crore was recovered by the DGGI.
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