Govt will use AI, Aadhaar to track shell cos evading GST
THE DEPARTMENT OF REVENUE IS CONSIDERING CLASSIFYING SUCH FIRMS AS ‘RISKY’
NEW DELHI: The government will use artificial intelligence (AI) and Aadhaar registration to segregate dubious firms purposely created for Goods and Services Tax (GST) evasion and put them under the “risky” category to closely monitor their activities, two finance ministry officials said.
The customs department has already created a database of “risky” exporters who fraudulently avail input tax credit (ITC) and nabbed several firms, including star exporters. Now the same mechanism could be used for fake firms claiming GST refunds without actually conducting business, they said requesting anonymity.
“It is surprising that many fake firms and shell companies have been created that generate fake invoices to claim GST refunds and wrongful avaiIment of ITC. It has become almost an independent business, which needs to be dealt with an iron hand. Recently we have caught owner of such fake firms in Pune that cheated over ₹50 crore,” one of the officials said.
The owner of the firm, who admitted trading in fake invoices on commission basis through some fake companies, was arrested by the Pune zone unit of the Directorate General of GST Intelligence (DGGI). The official said after a long tracing, the person was arrested October 21, 2020 from a remote village in Osmanabad district of Maharashtra. He was produced before the magistrate who rejected his bail application and remanded him to judicial custody till November 2.
The data analytics helped to catch unscrupulous activities of the person, he said. “Now the government is using Aadhaar in GST registration to check this menace of bogus/fake firms and thereby put a curb on fraudulent availment and passing on of ITC,” he said.
“Also, serious deliberations are on in the Department of Revenue [DoR] of putting such dubious firms under risk category and to block their refunds, besides other appropriate legal actions, as necessary,” he added. DoR is an arm of the finance ministry that is responsible for administration of matters related to direct and indirect taxes.
Commenting on the Pune arrest, the second official said, “There is a lobby of businessmen, which gains from such fraudulent activities, and they are oppose the arrest of the person despite the confession of the arrested person. If l eft unchecked, such dubious companies would mushroom all over the country.”
“We have also identified 115 fake firms across nine GST commissionerates with the help of data analytics in which the crime was committed by a prospective chartered accountant based in Ahmedabad, who registered fake firms and wrongfully usurped ITC worth ₹50.24 crore,” he said.