GST Authorities to Pursue Fake ITC Investigations on 1.25 Lakh Entities Until December

Posted on    16 September 2023

The Goods and Services Tax (GST) authorities in India are conducting follow-up investigations on more than 1.25 lakh entities until December in an effort to curb revenue leakages. These investigations primarily focus on fake input tax credit (ITC) claims.

Input tax credit (ITC) is a mechanism that allows GST taxpayers to claim credit for taxes they've paid on inputs used in the production of goods or services. Fake invoicing occurs when invoices are issued for transactions that never actually took place, and these fake invoices are then used to fraudulently claim ITC, resulting in revenue losses for the government.


In the initial phase of a special drive conducted by the Central Board of Indirect Taxes and Customs (CBIC) from May 14 to July 14, approximately 77,200 entities were verified, and around 20,800 of them were found to be involved in bogus transactions. Following this, the authorities are now conducting follow-up investigations to trace the entire chain of fake ITC claims.

The follow-up investigations aim to determine to whom the fake ITCs were supplied, reaching levels 1 and 2 of the fake ITC chain. This is a continuation of the efforts to uncover the extent of fraudulent activities in the GST system. It is worth noting that some of the entities under investigation may be non-existent or fake, while others may include government agencies and reputable companies.

The investigation process involves coordination between the central and state tax administrations, as entities involved in fake invoicing often operate across different states. The investigations will continue until CBIC verifies all the entities that received supplies based on fake invoices, and this process may extend until the end of December. If more companies are uncovered during the follow-up, the investigations will proceed to level two in the supply chain.

Additionally, the authorities are currently adjudicating the findings of the special drive to determine liabilities based on the evidence collected during the investigations. This ongoing effort reflects the government's commitment to cracking down on tax fraud and revenue losses in the GST system.

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