Government Exposed 115 GST Firms involved in Passing Fake Tax Credits

The government has unearthed a fake invoice racket involving 115 firms that allegedly passed on tax credits under Goods and Services Tax (GST) without supplying any goods or services. The sources informed that there was an arrest of one person in connection with this issue. 

The investigation revealed that the firms had wrongfully passed on approximately Rs.50 crores of tax credits. Also, the information is that the fraud got detected with the help of data analytics. 

The location of the bogus firms set up for generating fake invoices is under the tax administration of states of Maharashtra, Gujarat and Rajasthan. The sources said that the Directorate General of GST Intelligence (DGGI) is keeping a close watch on questionable use of tax credits.

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These 115 firms might be issuing fake invoices to the recipients without actual supply of any goods or services, which in turn are availing Input Tax Credit (ITC) based on these fake invoices. The firms issued invoices mainly on manpower supply services and consultancy services.

The legal provisions are enhanced further to check the illegal use of tax credits. The government is looking at classifying firms with a questionable compliance track record in the risky category in the same way it rates exporters based on their compliance history. 

The government is continuously tightening the GST provisions to improve compliance. The measures to curb the wrongful claiming of ITC include implementing e-invoicing from October 2020 for large business and making Aadhaar authentication mandatory from August 2020 onwards for GST registration.

For any clarifications/feedback on the topic, please contact the writer at

dvsr.anjaneyulu@cleartax.in