Fraudulently availing GST input credit void of invoice non-bailable, cognizable offence

At present, Section 132 of the CGST Act treats supply of goods and services without issuance of any invoice, issuance of any invoice or bill without supply of goods or services, collection of tax but non-payment to government as non-bailable and cognizable offences.

In a move which would further tighten the noose on those committing frauds under the Goods and Services Tax (GST) regime, the Union Budget for 2020-21 has made the fraudulent availment of input tax credit without invoice or bill a

cognizable and non-bailable offence. While the Central GST (CGST) Act covers those who engage in fake invoices or circular trading, this move will help the GST authorities to bring to book those who issue invoices without actually carrying out any business.

This category has been added to the existing non-bailable, cognizable offences under the Act. At present, Section 132 of the CGST Act treats supply of goods and services without issuance of any invoice, issuance of any invoice or bill without supply of goods or services, collection of tax but non-payment to government as non-bailable and cognizable offences.

At a time when the government’s revenues from GST have slowed, with the revised estimates for 2019-20 for CGST falling short of the original target by Rs 12,000 crore and for cess by Rs 11,016 crore, stricter action on such frauds would help the government to plug revenue leakages in absence of a foolproof online returns matching system.

“…several cases of fraudulent input tax credit (ITC) claim have been caught by the GST authorities. In these cases, fake invoices are obtained by suppliers registered under GST to fraudulently claim ITC and reduce their GST liability. These invoices are found to be issued by racketeers who do not actually carry on any business or profession. They only issue invoices without actually supplying any goods or services. The GST shown to have been charged on such invoices is neither paid nor is intended to be paid. Such fraudulent arrangements deserve to be dealt with harsher provisions under the Act,” the Budget documents stated, adding that these changes would be effective from April 1.

The government has also proposed to levy penalty on a person, if there is a false entry or any entry has omitted to evade tax liability. “It is also propose to provide that any other person, who causes in any manner a person to make or cause to make a false entry or omits or causes to omit any entry, shall also pay by way of penalty a sum which is equal to the aggregate amounts of such false entries or omitted entry,” it said