The government will use artificial intelligence (AI) and Aadhaar registration to segregate dubious firms purposely created for Goods and Services Tax (GST) evasion and put them under the “risky” category to closely monitor their activities, two finance ministry officials said.
The customs department has already created a database of “risky” exporters who fraudulently availed input tax credit (ITC) and nabbed several firms, including star exporters. Now the same mechanism could be used for fake firms claiming GST refunds without actually conducting business, they said requesting anonymity.
“It is surprising that many fake firms and shell companies have been created that generate fake invoices to claim GST refunds. It has become an independent business, which needs to be dealt with an iron hand. Recently we caught the owner of one such fake firm in Pune that made over Rs 50 crore illegally,” one of the officials said.
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The owner of the firm, which traded in fake invoices on commission basis through some fake companies, was arrested by the Pune zone unit of the Directorate General of GST Intelligence (DGGI). The official said the person was arrested on October 21, 2020 from a remote village in Osmanabad district of Maharashtra. He was produced before the magistrate who rejected his bail application and remanded him to judicial custody till November 2.
Data analytics helped to catch unscrupulous activities of the person, he said. “Now the government is considering the use of Aadhaar in GST registration to check this menace of bogus/fake firms and thereby put a curb on fraudulent availment and passing on of ITC,” he said.
“Also, serious deliberations are on in the Department of Revenue [DoR] of putting such dubious firms under the ‘risky’ category and to block their refunds, besides other appropriate legal actions, as necessary,” he added. DoR is an arm of the finance ministry that is responsible for the administration of matters related to direct and indirect taxes.
Commenting on the Pune arrest, the second official said, “There is a lobby of businessmen, which gains from such fraudulent activities, and they oppose the arrest of the person despite a recorded confession. If left unchecked, such dubious companies would mushroom all over the country.”
“We have also identified 115 fake firms across nine GST commissionerates with the help of data analytics. The crime was committed by a prospective chartered accountant based in Ahmedabad, who registered fake firms and wrongfully usurped ITC worth Rs 50.24 crore,” he said.
“DGGI is keeping non-intrusive but a close watch through rigorous data-mining and data analytics on such dubious and unscrupulous elements who in the garb of professionals take up illegal availment of ITC and evasion of GST,” he said. The officials said the aspiring chartered accountant, a third-year student, was involved in the registration of 115 non-existent firms.
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