Prosecutors arrested 25 people and filed 350 false billing cases, in a major campaign against tax evasion, said an official from the General Directorate of GST Intelligence (DGGI), under conditions of anonymity.
The false invoices were used to evade goods and services tax (GST) and income tax and to divert funds from companies, the official said. The false invoices were issued against more than 1,100 entities, he said.
Fake invoices are also used to show non-existent transactions to increase figures on the books to obtain loans from banks and divert funds and also to claim GST refunds for exporters.
The increase in non-compliance cases has led the government to tighten the process for the new GST registration, he said.
The new rules oblige business owners or promoters who do not have records of paying corresponding income taxes to undergo a physical and financial verification process before their companies can obtain GST registration, the official said.
Investigations showed that false invoices are being issued rampantly for certain products such as metals, plastic granules, ready-made garments, gold and silver, construction services, employment contract services, agricultural products, labor supply and advertising, and animation services said. The compliance directorate (ED) will also investigate the cases, the official said.
Direct and indirect tax authorities have been expanding the use of technology and data analytics to identify companies with a poor compliance record. This is expected to gain further momentum with the sharp reduction in tax revenue this year.
The GST authorities have made electronic invoicing (electronic invoice) mandatory for companies with sales of more than ₹500 crore from October 1.
As of April 1, 2021, electronic invoice services will be extended to companies with sales of more than ₹100 crore. The move will help officials get an idea of the transactions taking place in the economy in real time and allow them to avoid fraud.
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