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After discovering around 12,500 fake entities, the Goods and Services Tax (GST) authorities are looking to tighten registration standards through biometric authentication and geo-tagging of dangerous entities. Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri said on Saturday that the filing system will be further tightened to work against fraudsters who misuse Permanent Account Number (PAN) and Aadhaar identification to obtain GST registration.
“This two-month special flight which is now taking place, is being conducted jointly by the United States and we (the centre), and has identified 60,000 units as suspicious. Of those, 50,000 checks have already been made and we found that about 25 per cent (of 50,000) It was fake… So about 12,500,” Johri told reporters after GST Day marking six years since the introduction of the indirect tax system.
The GST authorities plan to introduce biometric authentication and geo-tagging for both existing and new registrants if they are identified as risky entities fraudulently benefiting from the input tax credit. Johari said geo-tagging of all entities is planned by the officers of the COMCEC AI Center to certify that the address provided during GST registration is where the entity operates from.
He said that a trial of biometric authentication and geo-tagging is already underway in two or three states, and depending on the results and assessment of digital infrastructure requirements, the project will be launched across India.
“We are trying to see how we can tighten the system further… We used OTP-based authentication earlier. Now we are going for biometric authentication as well. Which means that in suspicious cases, people will be asked to go to an Aadhaar center to check their biometrics.”
The tax authorities have identified some locations where the fake entities are common, such as Delhi, Haryana and Rajasthan. He said certain parts of Gujarat, Noida, Kolkata, Assam and some parts of Telangana, Tamil Nadu and Maharashtra also registered cases of fake entities with GST registration. The sectors where cases of fake entities are mainly detected include scrap metal or plastic, and waste paper. “We also discovered that it is generated for services. So, manpower services and advertising services have cases of fake billing,” Johari added.
Concerns have been raised by some service sector companies, particularly co-working spaces, because they do not usually fit into the brick-and-mortar rules for GST registration. They gave us some suggestions, and we are still considering them. There are two areas where some of the comments came from the trade. One is that the service industry operates out of common business areas, not all business entities have their own place of business so they operate from these places… Under GST law, and this is not unique to India, you have to have a specific place of business Commercial, only then your records are kept there, your accounts are kept there, so any time the tax authorities want to audit you, they want to look at your accounts, there needs to be a brick and mortar structure. “There is difficulty in agreeing on what they want us to accept, but this is under scrutiny,” Johari said.
On the control of phantom Input Tax Credit (ITC) claims, Johari said the tax authorities have tightened the system but there is still some scope for taxpayers to adjust the amount of ITC they can claim in GSTR-2A.
This is there due to concerns raised by the trade, where the supplier does not upload the invoice on time and there are some invoices that they have already paid but are not able to take credit because they are not uploaded.
“We have allowed some liberalization easing. We will see how we can tighten it so that the scope of traversing some international trade centers is reduced,” Johari added.
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