Tax authorities have detected goods and services tax evasion of ₹40,000 crore in over a year, largely on account of fake invoices and fraud input tax credit claims. 

A host of measures aimed at plugging loopholes and preventing such frauds are set to kick in from January 1, but a senior government official told ET that adequate care was being taken to ensure these did not compromise with the government's ease of doing business initiative. The Central Board of Indirect Taxes and Customs had launched an All-India Enforcement Drive from November 9, 2020 through the Directorate General of GST Intelligence and various Central GST formations. "More than 5,700 cases, involving an amount of about Rs 40,000 crore, have been detected," the official said. 

The latest measures are aimed at tackling such frauds, impart better payment discipline and also protect the recipient who is not always in a position to ascertain that his supplier has paid the tax and is vulnerable to the recovery of input tax credit, when the tax is not paid by the supplier. 

"These amendments will not, in any way, impact ease of doing business which is achieved in GST through a liberal registration, refund regime and self-compliance mechanism based on self-assessment and self-policing, with little or no manual checks," the official added. 

"Most of these changes are aimed at plugging the misuse of input credit and are in the right direction," said Pratik Jain, partner at Price Waterhouse & Co. He said many large companies had already implemented a system of claiming only matched credit and now others will need to follow. This does require use of robust technology solutions if the volume of transactions is large, he said, adding that currently there was no mechanism for the buyers to find out whether the seller has actually paid the tax or not. 

Plugging loopholes 

The government, on the recommendations of the GST Council, has brought some amendments to the CGST Act 2017, through the Finance Act, 2021, which will come into effect on January 1. Among the changes that are to come into effect include a key one that provides that input tax credit on an invoice or debit note may be availed of only when the details have been furnished by the supplier in his statement of outward supplies and such details have been communicated to the recipient of the invoice or debit note.