GST (Goods and Services Tax) is one of the most significant taxes in India. It is an indirect tax that has successfully transformed the landscape of Indian taxation. GST has been an important part of India’s economy since the year 2017, however, there is a sudden rise in the frauds regarding GST. This indirect tax does not only impact the government revenue but it is also a major part of the taxation system of India.
If you have come across the news, in May 2023, it has been reported that more than 10,000 GSTINs have been blocked and legal actions have also been implemented against approximately 1000 taxpayers. And, since a year and so, it has become necessary for every business to take proper actions regarding GST as frauds are getting higher day by day. But, what exactly is the GST fraud?
Explaining GST Fraud
As per the ICAI, which stands for Institute of Chartered Accountants in India, GST frauds are some kind of wrongful activities that harm the revenue generation of the government. In simple words, we can say that GST Fraud is the evasion of taxes which are held under GST. These unauthentic activities are broadly divided into various categories, let us make a list for you!
- Claiming incorrect ITC i.e. Input Tax Credit
- Getting fake invoices or even issuing them
- Wrongful filing of ITC returns
- E-credit forging
- It also includes the incorrect filing with malicious information
We cannot say that the list is limited to these above pointers only, this includes several more claims that people can try to claim wrongfully from your business. The Government of India has started to take actions on these activities and have been very active in this field. From May 2023, there have been several instances where the government tried to rectify the situation. Let us discuss those initiatives now, but first let us make a list for your business to make sure that GST fraud will not happen.
Protect Your Business from GST Fraud
As mentioned, the fraudsters are very active in their tricks, and the government is also doing its part. Nonetheless, as an entrepreneur or a business owner, it is your duty to implement every step with precautions and smartness. Make sure that you consider the following practices to ensure that your GST structure is stable.
- Make sure that you have all the necessary documents– Considerable documentation is the key towards a good GST structure. For your GST compliance system, you should make a record of every transaction and also track the documents from time to time. An audit should be done to make sure that everything is going smoothly.
- Process Automation– If you want to reduce your errors, then automating your process is the key. It helps diminish the GST frauds as there is no human input, so the data and process will be accurate.
- Establish your security protocols– In order to detect the fraud and resolve the issues in quick seconds, the compliance system of your business or security protocols should be in place. Make sure to establish the protocols properly.
- You should file your returns at time– It is a very simple way to prevent any sort of GST fraud, just make certain that your business is filing the returns on time. If you delay in such filing, it provides opportunities for fraudsters.
- Maintain your GST Compliance– To safeguard your GST records and prevent your business from fraud, you should establish a proper GST compliance within your architecture. Make sure that timely actions should be taken whenever there is a change in company policy or regulations.
- Uphold diligence– If you are a business owner or any stakeholder who thinks that there is something wrong with your GST record then you should make a report at that moment and necessary actions should be implemented.
Now that we have mentioned all the necessary practices that you should take care of, let us tell you that the Indian Government has also been taking actions on this matter. Recently, the officials have organized a Special Drive where their primary goal was to locate and remove the fake GST registrations. As a result of this special drive by the government, they can reduce the chance of fraud, improve the GST compliance and most importantly it can benefit all those who are paying their taxes honestly.
Prevent Fake GST Registration
As a business, you should follow some necessary steps that make sure that you won’t be a victim of GST fraud. Get started to take notes!
- Always verify the GSTIN
- Check the amount payable and the Tax value
- Keep a track on invoice date and its number
- Take a note of the HSN/SAC Code and check it
- Also, check the signatures
- Check your GSTR 2A/2B
Despite taking all the necessary steps, it is possible that you may get scammed or some GST fraud can happen, so what then? What steps should be taken after the fraud? Let us tell you!
Reporting the Fake GST Registration
As an Indian citizen, it is your duty to report a Fake GST registration whenever you come across those. If any fake GST has been made under your PAN, then there should be no delay because your business can be at a huge risk. So, to make the process easy for you, let us mention the procedure to report a Fake GST registration.
- First of all, go and log in your account at the official site of the GST. Log in using your PAN and password.
- Once you login there, go to the services block and you’ll find a drop-down menu there, select “user services”
- Now, what you have to do is click on “Report Suspected Fraud”. In this section, you have to fill in every detail regarding the fake GST registration, its number and other related details.
- Once you are done with the report successfully, the GST department will take all the necessary actions to resolve this situation.
Filing a report against a Fake GST registration is not only your responsibility but it also benefits you. If someone has used your PAN then you will be responsible for all the bad deeds that they have done, they can also use this to make false claims. Further, by reporting fake GST registration, you help the GST system to maintain its integrity. Ultimately it also helps in combat tax evasion and significantly impacts economic growth positively.
To Conclude!
It is really important to verify the realness of the GSTIN that comes across your business, it safeguards the lifecycle of your company. Take all the necessary precautions and you can always seek help from the officials if you think there is something sketchy going on with your business’s GSTIN. Make sure to check all the invoice and its dedicated details. Such drives such as All-India Special Drive by the Indian government can be your inspiration to safeguard yourself from any fake GST registration or any fraud. We wish you the best!