Page 33 - GSTL_18th June 2020_Vol 37_Part 3

2020 ] ANALYSIS OF GST FRAUDS & THEIR MITIGATION J67
detect. Can be detected in GST audit under Section 35 as well as
revenue audits.
(6) Nil rate goods/services as per bill - actually liable to tax. Type of
input whether usable at the receivers end. E-way Bill checking in
route. Can be detected in GST audit under Section 35 as well as rev-
enue audits.
(7) Lower rate than that which is applicable. This may be there due to
industry practice as well. Especially when supplies are to the con-
sumer. If found in one part of India, it could be a modus used
throughout India. Classification decisions may indicate which
products there are doubts.
(8) Inflated value bills as ITC is available in B2B. Revenue audit can de-
tect if vigilant. Data analytical software item wise rate comparison
can detect this.
(9) Undervaluation for supply to unregistered or exempted entities or
B2C. As above.
(10) Valuation issues where consideration comes from OEM or others
along with customer in times of poor demand (Auto sector), change
in models [Mobiles - next version, garments - out of fashion].
(11) Services by recipient to customer passed on as discounts to price by
customer.
(12) Inflated quantity and value bills with less supplies in B2B.
(13) Invoiced and then credit note issued without GST in B2B.
(14) Undervaluation using Rule 28 (declared value). Analysis of 9C of all
entities/group companies.
(15) Cross charge between same entity and between related entities.
Analysis of 9C of all entities/group companies
(16) Overvaluation of exports to get FTP benefits. Comparison to domes-
tic supply rate.
(17) Setting up new entities, splitting up orders among units having dif-
ferent PAN to take advantage of ` 40 Lakhs.
(18) Service providers splitting their bills to keep under ` 20 Lakhs
exemption.
(19) Conversion of regular registration to multiple composition registra-
tion to take advantage of ` 1.5 crores payment @ 1% instead of on
value addition 18%/28%.
(20) Many others could be there…
Inherently Risky Industries :
There are some industries which are generally indulging in fraud due to
the current lack of compliance in those sectors. Examples could be all duplicate
brand manufacturers, unorganised garment, pan masala, gutka, smaller steel
mills, etc.
However, all companies in that sector would not be non-compliant. Such
industries where there is an inherent risk need to have more extensive verifica-
tion in movement of goods, in depth revenue or audit under Section 35. Frequent
GST LAW TIMES  18th June 2020  33