Crackdown on Fake GST Registrations: 10,000 Frauds Detected in First week

Published on: Fri May 26 2023
Crackdown on Fake GST Registrations: 10,000 Frauds Detected in First week

During the first week of a collaborative operation, officials from the central and state goods and services tax departments identified approximately 10,000 fake GST registrations. Before taking any action, these officials are currently engaged in door-to-door verification of addresses. The campaign, aimed at combating fake invoices and registrations, commenced on May 15 and will continue until July 15.

GST Crackdown

“A senior official informed ET that around 10,000 fake GST registrations have been detected during the initial week of the operation. Many instances revealed that forged electricity bills, property tax receipts, and rent agreements were used as false evidence of the principal place of business to obtain GST registration.

The exact amount of fraudulent input tax credit is yet to be determined. The official mentioned that it is too early to provide precise figures, but initial estimates suggest it could exceed ₹25,000 crore. The final numbers will be available upon completion of the operation.

The selection of cases for physical verification has been done through data analytics and risk assessment by the GST Network (GSTN). GSTN identifies potential fraudulent GST identification numbers (GSTINs) for both state and central tax authorities.

Concerns have been raised by small-scale industry lobby groups, suggesting that this approach may adversely affect smaller companies that utilize co-working spaces. Vinod Kumar, trustee and president of the Forum for Internet Retailers, Sellers, and Traders (FIRST) in India, stated, “GST verification officers are demanding physical records and the presence of employees and/or directors during verification. As many online sellers register their businesses at their chartered accountant’s offices or co-working spaces to enjoy cost benefits and ensure better compliance, this current operation could significantly harm genuine small-scale sellers.”

However, the aforementioned official dismissed these concerns by clarifying that these verifications are not search operations but rather the physical verification of addresses conducted by field formations. Cancellation actions will only be undertaken after proper due diligence is carried out.”

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