An urgent meeting of the law committee of the GST Council has been convened on Wednesday here to discuss in detail the issue of fake invoices to claim input tax credit under the indirect tax regime.
The meeting will discuss the ways of further tightening of the GST registration process and work out other legal measures including necessary amendment in the GST laws to arrest fake invoicing, sources in the finance ministry said.
The sources said this meeting is part of the nationwide drive against the GST fake invoices. The authorities have arrested 25 persons and booked 350 cases against 1,180 entities.
The crackdown, carried out between November 9 and 13, resumed on Monday after diwali recess.
The sources said fake invoices were not only issued for availing or passing of input tax credit but were also used as conduit for nefarious activities leading to tax evasion, massive bank loan fraud, money laundering and hawala transactions.
This has very serious impact on the economy in the long run. These activities have largely been carried out by non-existent or fly-by-night firms and by using a network of firms to game the system to usurp ITC on commission basis.
The committee, comprising officers, would also do some out of the box thinking on this issue as at present the only way to curb this illegal activity is to identify the chain of entities involved in issuance of fake invoices, availment of credit and take stern action against them.
In its efforts to tighten the registration process under the GST system, the businesses whose owners or promoters do not have commensurate financial track record like filing of income tax returns and payment of income tax to the government may require detailed physical and financial verification by tax officers before their companies can be considered for GST registration.