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DGGI's Special Drive Against Fake Input Tax Credit (ITC)

Introduction

The Directorate General of GST Intelligence (DGGI), known for its role in combating GST tax evasion, launched a Special Drive in November 2020 to tackle the issue of fake Input Tax Credit (ITC) claims. The objective was to address the leakage in government revenue caused by such fraudulent practices. Since then, the DGGI has been actively detecting and investigating cases of ITC evasion. This article explores the efforts made by the DGGI to identify and apprehend tax evaders, the techniques employed by these syndicates, and the impact on government revenue.

Unveiling the Extent of Fake ITC Cases

From April 2020 to September 2023, the DGGI successfully detected over 6,000 cases of fake ITC, resulting in more than Rs. 57,000 crore of GST evasion. To ensure accountability, the DGGI has arrested 500 individuals involved in these fraudulent activities. The scale of these operations required the DGGI to intensify its efforts further.

Targeting the Masterminds and Disrupting Syndicates

Since June 2023, the DGGI has focused on identifying and apprehending the masterminds behind these fake ITC operations. These syndicates operate across the country, making it crucial for the DGGI to disrupt their activities. Leveraging data analysis and advanced technical tools, the DGGI has successfully unraveled several cases and apprehended tax evaders.

Techniques Employed by Tax Syndicates

Tax syndicates often exploit gullible individuals by enticing them with promises of employment, commissions, bank loans, and other financial benefits. These individuals unknowingly provide their KYC documents, which the syndicates then use to create fake or shell firms without their consent. In some instances, the concerned individuals are aware of the use of their KYC documents, but they receive small pecuniary benefits in return.

Detection and Apprehension in the Current Financial Year

In the ongoing financial year 2023-24, the DGGI has already detected 1,040 cases of fake ITC amounting to Rs. 14,000 crore. This demonstrates the persistence of these fraudulent practices. To combat this, the DGGI has apprehended 91 fraudsters thus far. The efforts to detect and prevent fake ITC cases remain a top priority for the DGGI.

Deploying Nationwide Intelligence Network and Data Analytics

The DGGI utilizes its nationwide intelligence network to gather crucial information related to fake ITC cases. In addition, advanced data analytics technologies play a significant role in producing intelligence, especially in emerging areas of tax evasion. These cutting-edge tools enable the DGGI to stay ahead of the threat posed by GST evasion.

Voluntary Payment and Total GST Evasion

To rectify the GST evasion, the DGGI has received a voluntary payment of Rs. 14,108 crore. This payment contributes to the recovery of a total of Rs. 1.36 lakh crore, including bogus ITC, which has been identified in the fiscal year 2023-24. The voluntary payment demonstrates a commitment towards rectifying the financial impact of these fraudulent practices.

Conclusion

The DGGI's Special Drive against fake ITC claims has proven to be effective in detecting and preventing GST evasion. The extensive use of data analysis and advanced tools has enabled the DGGI to identify and apprehend tax evaders, including the masterminds behind these syndicates. The ongoing efforts of the DGGI are crucial in safeguarding government revenue and ensuring a fair and transparent tax system.

 

author

The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

Frequently Asked Questions

DGGI stands for Directorate General of GST Intelligence. It is an intelligence and investigative agency under the Central Board of Indirect Taxes and Customs (CBIC) responsible for detecting and combating tax evasion related to Goods and Services Tax (GST).

The purpose of DGGI's special drive against fake Input Tax Credit (ITC) is to identify and crack down on instances of fraudulent claims of ITC, where businesses illegitimately claim tax credits on fake or non-existent invoices to reduce their tax liability.

Fake Input Tax Credit (ITC) undermines the integrity of the GST system by reducing the tax revenue collected by the government, distorting competition among businesses, and eroding the fairness and effectiveness of the tax regime.

Some common methods used to generate fake Input Tax Credit (ITC) include issuing fake invoices, inflating input tax amounts, creating shell companies or dummy vendors, and engaging in circular trading to generate fictitious transactions.

DGGI identifies cases of fake Input Tax Credit (ITC) through data analytics, intelligence gathering, risk profiling, audits, and investigations into suspicious transactions, patterns, and behavior of taxpayers.

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