News

Published: July 3, 2023
Updated: July 3, 2023

CBIC Aims to Combat GST Fraud with Biometric Authentication and Tighter Return Filing

The Central Board of Indirect Taxes and Customs (CBIC) in India is taking decisive action to address the issue of fraudulent entities misusing the Goods and Services Tax (GST) system. CBIC chief Vivek Johri has announced plans for biometric authentication and geo-tagging to curb GST fraud. Additionally, discussions are underway to tighten the GST return filing system to restrict the claiming of Input Tax Credit (ITC) when taxes have not been paid by suppliers in the supply chain.

Biometric Authentication and Geo-Tagging to Counter Fraud:

CBIC is developing a biometric authentication system for risky entities under GST to crack down on fraudsters who use PAN and Aadhaar details of others to obtain GST registration. The proposed authentication will involve authorised representatives, directors, or partners of companies, ensuring that entities set up solely for fraudulent ITC claims can be identified. Furthermore, CBIC plans to implement geo-tagging of all entities to verify that the registered address matches the entity's operational location.

Pilot Programs and Pan-India Rollout:

Pilot programs for biometric authentication and geo-tagging are already underway in select states. The success and evaluation of digital infrastructure requirements will determine the pan-India launch of these initiatives. CBIC aims to strengthen the existing system by replacing OTP-based authentication with biometric verification for suspicious cases, requiring individuals to visit an Aadhaar centre.

Cracking Down on Bogus Entities:

In the ongoing campaign against fake registration, GST officers have identified approximately 12,500 bogus entities involved in fraudulent ITC claims, resulting in losses for the exchequer. Fake entities are prevalent in various regions, including Delhi, Haryana, Rajasthan, Gujarat, Noida, Kolkata, Assam, Telangana, Tamil Nadu, and Maharashtra. Sectors such as metal or plastic scrap, waste paper, manpower services, and advertising services have witnessed instances of fake billing.

Tightening the System and Addressing ITC Claims:

While efforts have been made to control fake ITC claims, CBIC acknowledges the need for further improvement. The system allows some latitude for taxpayers to edit the amount of ITC they can claim in GSTR-2A due to concerns raised by trade regarding delayed invoice uploads. CBIC intends to reduce the scope for passing certain ITC by tightening the editing facilities.

Move to foster compliance and prevent fraudulent practices:

The CBIC's proactive measures, including biometric authentication, geo-tagging, and tightened return filing systems, aim to tackle GST fraud and protect the integrity of the taxation system. By curbing fake registrations and minimizing fraudulent ITC claims, the authorities strive to ensure a fair and transparent GST framework. These initiatives underscore the commitment to creating an environment that fosters compliance and discourages fraudulent practices.