Fake firms .. Beware..!!! Government is creating list of “Risky” companies

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Now, the government is going to 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. The customs department has already created a database of “risky” exporters who fraudulently availed 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.

It is surprising that many fake firms and shell companies have been created that generate fake invoices to claim GST refunds. It has become an independent business, which needs to be dealt with an iron hand. Recently they caught the owner of one such fake firm in Pune that made over ₹50 crore illegally. The owner of the firm, which traded 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 that the person was arrested on 21st October 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 2nd November 2020.

Data analytics helped to catch unscrupulous activities of the person. Now the government is considering the use of Aadhaar in GST registration to check this menace of fake firms and thereby put a curb on fraudulent availment and passing on of ITC. Also, serious deliberations are on in the Department of Revenue [DoR] of putting such dubious firms under the “risky” category and to block their refunds, besides other appropriate legal actions, as necessary. There is a lobby of businessmen, which gains from such fraudulent activities, and they oppose the arrest of the person despite a recorded confession. If left unchecked, such dubious companies would mushroom all over the country.

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