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Stating that the challenge of illicit trade looms larger than before, Central Board of Indirect Taxes and Customs (CBIC) chief Sanjay Kumar Agarwal Thursday said tackling issues such as counterfeit products, smuggling and tax evasion is fundamental to safeguarding India’s economic stability.
At the release of a report by industry body FICCI — ‘Hidden Streams: Linkages Between Illicit Markets, Financial Flows, Organised Crime and Terrorism’ — Agarwal said these issues have “profound socioeconomic implications and undermine national security”.
He said an environment is being created so that fraudsters are not allowed to enter the ecosystem. “The recent decisions in successive GST Council meetings to make suitable changes in return filing are in that direction only so that the menace of fake ITC (input tax credit) can be cut. This will meet the long standing demand of trade and industry, especially sectors like iron, steel, which are impacted by fake ITC to a large extent,” he said.
Agarwal said the solution to deal with fake ITC generation is complex and the department has received various suggestions regarding rates. “It is being discussed. It’s not just iron and steel but other sectors also,” he said, adding that the GST Council’s recent decision on the return filing and registration process would help in solving the problem of fake ITC and fake businesses.
The report by FICCI (Federation of Indian Chambers of Commerce & Industry) estimated the score of illegal economy in India at 6.3, which is higher than the average score of 5 of other 122 countries. The report stated that although there are fewer criminal actors, they are widespread and engage in a variety of unlawful activities, including drug and human trafficking and the illegal trade in wildlife products, mainly due to the efficacy of criminal networks in India, which has enabled them to generate substantial illicit financial flows despite their small numbers.
The presence of significant illegal markets in India increases the country’s vulnerability to terrorism and criminal activities, it said. “The relationship between the profits generated from the drug trade and the establishment of assets within Punjab serves as a reminder of the financial motivation driving such illicit enterprises,” it said.
Citing secondary data sources from international and other agencies on terror and crime, such as the Global Terror Index (GTI), Crime Index and Global Organised Crime Index (GOCI), the report said that the economic impact of violence was estimated at $1.17 trillion in 2021, which accounts for approximately 6 per cent of the country’s GDP in terms of purchasing power parity (PPP) and violence per capita impact is estimated at $841 at PPP.
On the anti-smuggling front, the CBIC chairman said customs officers are keeping vigil on perpetrators and syndicates, be it with regard to outright smuggling or concealment in trade consignments. There has been an increase in the illicit drug trade in India in recent years, with the report stating that 3,172 cases of drug seizures were recorded during 2014-2022 as against 1,257 cases in 2006-2013. Total 4,888 arrests were made during the same period for these seizures involving 3.33 lakh kg of drugs worth Rs 20,000 crore.
