Page 32 - GSTL_18th June 2020_Vol 37_Part 3

J66 GST LAW TIMES [ Vol. 37

ANALYSIS OF GST FRAUDS & THEIR
MITIGATION
By
CA. Madhukar N. Hiregange

In India most of us the educated and lucky are in-
clined to pay just taxes. However, the compliance level of
competitors, sector itself not complying, non-business cost
of compliance, user being final consumer, earlier laws not
forcing accounting and providing ad hoc relief even if rec-
ords not maintained and taxpayer not seeing quid pro quo
of proper usage of taxes could have led to dilution in tax payment morality and
compromises in compliance.
In the uneducated/unorganised/tiny sectors the fact that they are in
survival mode and unable to meet their basic needs and ends, the tax compliance
would be very low.
The common ways in which revenue escapes taxation due deliberate ac-
tion as well as where/how it can be detected could be as under :
(1) Fake bill without supply and ITC without receipt of goods or ser-
vices. In goods there would be some tracking by way of E-way Bill,
transport documents, toll if applicable. Can be detected in GST au-
dit under Section 35 as well as revenue audits.
If one fake bill operator is found, then all bills raised on various per-
sons could be confirmed for being fake or genuine. The use of IP
address of the system used could be a good lead.
(2) Same transaction for services trail would need to examine contracts,
correspondences with customer, etc. Can be detected in GST audit
under Section 35 as well as revenue audits. If one fake bill operator
is found, then all bills raised on various persons could be confirmed
for being fake or genuine.
Disproportionate increase in service costs as compared to earlier
years could also indicate this.
(3) A variation of above could be accommodation bill received with
GST and supply bills made to another entity. If goods - then both
transactions would not be supported by genuine transport docu-
ments, toll receipts and E-way Bill if applicable at that point of time.
Here the payments may be netted off and irregular. Dates of receipt
by one entity and payment by another entity of similar amounts
could be a clue. Can be detected in GST audit under Section 35 as
well as revenue audits.
(4) Supplied to X billed to Y. Could be detected by way of ITC usage
patterns within and as compared to similar taxpayers. Can be de-
tected in GST audit under Section 35 as well as revenue audits.
(5) Transfer of credit by way of service bills. Short-term or long-term
accommodation for cash flow. Verification similar to (2) above may
GST LAW TIMES  18th June 2020  32