In May last year, the CBIC launched a drive against bogus registrations and fake invoices. Over seven months, the drive detected 29,273 bogus firms involved in ITC evasion totaling Rs 44,015 crore. This translated to savings of Rs 4,646 crore, with Rs 3,802 crore blocked ITC claims and Rs 844 crore recovered. Additionally, 121 arrests were made.

What is the motive behind these frauds? Apart from GST evasion, these frauds facilitate money laundering and fake purchases for income tax benefits. Showing reduced profit margins and higher expenses helps in reducing net profits for tax benefits. Entities can also present inflated turnovers to obtain higher credit limits, bank loans, and improve valuations for stake sales or IPOs. The fake invoice scheme can also divert company funds to save on taxes.

Would these measures help? Tax experts believe that the measure is “progressive in nature” and would help achieve its stated goals. However, the success depends on each state government’s readiness, including resources and training for GST officials. The functionality must also be user-friendly for large-scale implementation.

One expert noted that focusing on high-risk applicants with a history of cancelled or suspended registrations underscores the commitment to a “credible and transparent GST system.” Supported by the Directorate General of Analytics and Risk Management (DGARM) and GSTN, the measure would enhance the security and integrity of the registration process. The industry hopes for a single biometric authentication across India, allowing one-time verification for companies with a presence in multiple states, thus streamlining the process and reducing redundancy.

While acknowledging potential discrepancies in Aadhaar information, experts agree that the majority of future registrations would gain credibility due to this exercise.