GST officers unearth over Rs 35,000 crore fraud in 2020-21, arrest 426 persons

GST officers unearth over Rs 35,000 crore fraud in 2020-21, arrest 426 persons

The GST officials have found over Rs 35,000 crore of tax fraud committed by misusing the input tax credit provided under the Goods and Services Tax (GST) system during a year-long crackdown on tax cheating. The CGST zones and the Directorate General of GST Intelligence (DGGI) booked around 8,000 instances involving false ITC NSE 1.11 per cent of over Rs 35,000 crore during the 2020-21 financial year, according to a CBIC release.

Entities can decrease the tax they have already paid on inputs when paying tax on output under the GST regime.

However, some have taken advantage of the provision by fabricating phoney invoices for inputs.

“The most common mode of evasion under the GST law is the misuse of the benefit provision of ITC,” according to the statement.

“From the very beginning of the GST regime, the Central Board of Indirect Taxes and Customs (CBIC) field formations have been regularly finding such incidents.”

During the 2020-21 fiscal year (April 2020 to March 2021), 426 people were arrested, including 14 professionals such as accountants, lawyers, and directors.

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“With effect from November 9, 2020, a statewide special drive against the false GST invoice was initiated, which is still ongoing,” it added, citing the high percentage of fake ITC availment and use.

“However, due to the serious Covid pandemic spread over the last two to three months and related safety concerns, the driver slowed down,” the statement said. “However, with the gradual lifting of lockdown and improved Covid-19 situation in various parts of the country, the department has resumed the drive-in coordinated action at the national level,” it added.

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During this month, the Directorate General of GST Intelligence and all Central GST formations intensified their crackdown on fraudsters who are causing the government exchequer to lose money.

During the current financial year, the Directorate General of GST Intelligence and CGST Zones under CBIC has detected over 500 cases involving 1,200 businesses and arrested 24 people as part of the nationwide drive.

The number of arrests made by CBIC police is one of the greatest in recent memory, according to the statement.

To catch the fraudsters, CBIC officials are employing the most up-to-date IT technologies, digital proof, and information from other government offices.

GST’s Applicability to the Reverse Charge Mechanism for Service Imports

In another case, the CGST Ahmedabad Zone filed an ITC fraud case worth Rs 38 crore against thirteen phoney organisations that were set up to pass on fraudulent ITC by submitting counterfeit iron and steel invoices.

“The enforcement drive against phoney invoice fraudsters and other GST evaders is anticipated to intensify,” the statement stated, adding that the goal is to “identify and book unscrupulous people involved in illicit operations to cheat the government exchequer.”

Latest GST Update

Today’s Updates:

1. CBIC clarified that GST would not be levied on services provided by the Central or State Boards, including NBE, in the conduct of examinations for students including entrance exams. This move will benefit millions of households whose wards are at different levels in education.

2. In GST: Now HSN Code and Rate Mandatory in GSTR 1 from May 21.

Aggregate Turnover in the preceding Financial Year Number of Digits of HSN Code
Up to 5 crores Minimum 4 Digits
Exceeding 5 Crores Minimum 6 Digits

Tax Rate Reporting is mandatory in HSN Summary

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3. MCA Compliance: 30th June is the last date for filing form CFSS-2020: Form CFSS-2020 is a simple form in which details like CIN (Corporate Identification Number), Name of the Company and its Registered Office address, email of the Company and list of forms filed under the said scheme along with SRN are to be given. Immunity certificate will be issued by the designated Authority after the form is taken on record.

4. Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity): Refer [Circular No. 150/06/2021 dated 17th June 2021]

Discussion related to the credit of the TDS

7 GST Circulars issued today

 7 GST Circulars issued today providing clarity on the following issues:

1. Clarification regarding applicability of GST on supply of food in Anganwadis and Schools

Services provided to an educational institution by way of catering, including any mid-day meals scheme sponsored by the Central Government, State Government, or Union territory, are exempted under entry 66 clause (b)(ii) of notice No. 12/2017-Central Tax (Rate) dated 28th June 2017. This section is for pre-school and elementary schools.

As a result, any food service offered to an educational institution is exempt from GST, according to mentioned entry 66. The entry goes on to say that such excluded services include mid-day meal service, which is specifically mentioned in the entry. As a result, the scope of this article is broad enough to include any food served to a school, including pre-school. In addition, Anganwadi provides non-formal pre-school education. As a result, the definition of the educational institution includes Anganwadi (as pre-school)

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2. Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)

GST is exempt on services that fall under heading 9967 (service code) and is provided in exchange for annuity payments [entry 23A of notification No. 12/2017-Central Tax].

“Supporting services in transportation” is covered under heading 9967, and code 996742 is for “operation services of National Highways, State Highways, Expressways, Roads & Streets; bridges and tunnel operation services.” “Service by way of access to a road or a bridge on payment of toll,” according to entry 23 of the notification, is exempt. Entry 23 and 23A together exempt access to a road or bridge, regardless of whether the consideration is in the form of a toll or annuity.

3. Clarification regarding GST on supply of various services by Central and State Board (such as National Board of Examination)

Services Provided:

  • to its students, instructors, and staff by an educational institution;
  • by an educational institution through the administration of an entrance examination in exchange for payment in the form of an admission fee;
  • Similarly, services provided to an educational institution in connection with admission to or the conduct of an examination are GST-free [sl. No. 66 (b)(iv)- 12/2017-CT(r)].

Educational institutions are defined as follows in section 2(y) of the aforementioned notification:

  • “educational institution” refers to a facility that provides services in the form of, –
  • Preschool education and education up to the equivalent of an upper secondary school diploma;
  • education as part of a curriculum for acquiring a qualification recognised by any current law; education as part of an approved vocational education course;”
4. Clarification regarding GST rate on construction services provided to a Government Entity w.r.t construction of a Ropeway on turnkey basis

Other than that covered by items I (ia), (ib), (ic), (id), (ie), and (if) above, a composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 (other than that covered by items I (ia), (ib), (ic), (id), (ie), and (if) above) provided to the Central Government, State Government, Union Territory, a local authority

a civil structure or other original works primarily intended for purposes other than trade, industry, or any other business or profession;

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5. GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS

The entry at Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “combined supply of goods and services in which the value of the said composite supply constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government, Union territory or local authority or a governmental authority or a Government Entity by way of omission.”

Entry 28 of the 11th Schedule to the Constitution, which outlines the activities that can be assigned to a Panchayat under Article 243G of the Constitution, mentions Public Distribution. As a result, said entry No. 3A would apply to a composite supply of wheat milling and fortification by a miller, or of paddy into rice, as long as the value of goods supplied in such composite supply (fortification goods, packaging material, etc.) does not exceed 25% of the value of composite supply. Whether the value of commodities in such a composite supply is up to 25% is a question of fact that must be determined on a case-by-case basis.

6. Clarification regarding GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans

“Services supplied by the Central Government, State Governments, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from banking companies and financial institutions” are exempted under Entry No. 34A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

As a result, it is re-iterated, as proposed by the Council, that the Central or State Government’s guaranteeing of loans for its enterprise or PSU is particularly exempt under said entry No. 34A.

Any difficulties encountered in implementing this circular should be brought to the Board’s attention.

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7. Clarification regarding GST rate on laterals/parts of Sprinklers or Drip Irrigation System

The purpose of this entry is to cover laterals (pipes intended for use only or primarily with sprinklers/drip irrigation systems) and other elements suited for use solely or primarily with ‘sprinklers or drip irrigation systems,’ as defined in Note 2 (b) of Section XVI of the HSN. As a result, even if provided separately, laterals/parts to be used mainly or mostly with sprinklers or drip irrigation systems, which are classifiable under category 8424, would be subject to a GST of 12%.

Any part of general use categorised in a heading other than 8424 in terms of Section Note and Chapter Notes to HSN, however, will be subject to GST at the rate applicable to that heading.

If there is any difficulty, it should be brought to the Board’s attention right away. A Hindi version will be available soon.