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GST Council panel for 2-pronged strategy to curb fake invoices
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SME Times News Bureau | 23 Nov, 2020
The Law Committee of the GST Council has suggested a two-pronged strategy to tackle the issue of fake invoices, sources said.
According
to people in the know, the panel has recommended that new or fresh
registrations in GST may adopt an Aadhaar-like registration process
under which new registration can be done online with live photo and use
of biometrics with due verification of documents.
Such facilities
can be provided at banks, post offices, and GST Seva Kendras (GSK),
just like the Passport Seva Kendras or the Aadhaar Seva Kendras. The
GSKs can work on the pattern of the Passport Seva Kendras to provide new
registration facilities with required checks on fake registration.
According
to sources, the Law Committee has suggested that a fresh registrant
must go for compulsory physical verification and personal identification
in case he or she opts for non-Aadhaar authentication-based
registration process and does not have income tax return supported
adequate financial capability.
In such a case, he or she may have to submit a recommendation letter by two taxpayers of adequate reliability.
Further,
also, if on the basis of document supported credentials, a registrant
or dealer falls in "trustworthy" category, then he or she can be given
registration within seven working days.
If he or she is not in
the "trustworthy" category, then conditional registration shall be given
within 60 working days only after physical verification of the place of
business wherein in such cases input tax credit to their buyers shall
be allowed only after filing of their return and the dealers would be
required to pay certain portion of their liability in cash instead of
paying 100 per cent tax through ITC.
According to sources in the
Department of Revenue, to weed out existing fake dealers from the GST
system, the panel proposed full application of the Business Intelligence
and Fraud Analytics (BIFA) tool for precise identification of riskier
dealers based on the riskier input supply chain and outward supply
chain, abnormal taxpayer behaviour in terms of ITC availment, tax
payment for catching fake dealer and taking appropriate action,
including enforcement.
It has suggested suspension of first lot
of riskier traders and identification of such taxpayers on the basis of
significant criterion including non-filing of return for six months,
said sources, adding that the committee underlined that fact that there
are about 6 lakh dormant registrants in GST.
It further proposed
that no income tax credential be given if 99 per cent tax is paid
through ITC. There were about 35,000 such dealers who were given
registration in 2018-19 and 2019-20, having GST liability of more than
Rs 50 lakh (yearly), and more than 99 per cent tax paid through ITC and
have no credential in income tax (did not pay income tax even of Rs 1
lakh in last three years).
Sources said that in the Law
Committee's opinion, once a dealer is suspended, he has to explain the
discrepancy within the prescribed time limit for revocation of
suspension.
The urgent need to work out certain modifications in
the GST Rules is evident from the fact that within ten days of a
nationwide drive against the GST fake invoice frauds, the DGGI and CGST
Commissionerates have so far arrested 48 persons, including one woman
and three chartered accountants, and have booked 648 cases besides
identifying 2,385 entities, said people in the know.
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