The Goods and Services Tax (GST) is a landmark tax reform in India that came into effect on July 1, 2017. It has subsumed several central and state indirect taxes with the aim of streamlining and simplifying the tax system. This indirect tax is levied on the supply of goods and services, ultimately borne by the consumers. While it has improved tax compliance, instances of fraud have emerged with unscrupulous traders and businesses issuing fake GST bills to take undue advantage of the credit mechanism. In this article, we will explore how to spot fake GST bills and the complete procedure to report them.
How to Spot Fake GST Bills?
- Verify the GSTIN
The first and foremost step in identifying a fake GST bill is to check the unique 15-digit Goods and Services Tax Identification Number (GSTIN) printed on the invoice. GSTIN is a state-wise, PAN-based number issued to taxpayers registered under GST. The first two digits represent the state code, followed by the PAN number and a three-digit alphanumeric code. You can verify the authenticity of the GSTIN by visiting the government’s online portal (https://services.gst.gov.in/services/searchtp), entering the GSTIN, and checking if the details match with those of the seller.
- Examine the invoice format and details
A valid GST invoice should contain specific details such as invoice number, the name and address of the supplier, the taxable value of goods or services, a description of the goods or services, the tax rate, and the tax amount. It also includes the HSN (Harmonized System of Nomenclature) or SAC (Services Accounting Code) code, which classifies the goods or services being sold. Any invoice that lacks these details or contains incorrect, incomplete, or irrelevant information should be treated with suspicion. Additionally, a non-compliant invoice format could be a red flag for a fake GST detail.
- Mismatch in tax rates
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GST rates for goods and services vary based on their classification. Ensure the tax rates mentioned in the invoice match the rates applicable to the particular product or service. Familiarize yourself with the applicable GST rates for the goods or services you intend to purchase. A mismatch in tax rates could indicate a fake GST bill.
- Unusually high input tax credit
Some fake bills mention an unusually high input tax credit (ITC) to lure taxpayers into claiming a higher refund. The input tax credit is the credit that businesses can claim against taxes paid on inputs at various stages of production. ITC is an important component of GST as it eliminates the cascading effect of taxes. Any invoice that offers suspiciously high ITC should be scrutinized and verified before accepting it as valid.
- Absence of the QR code
With effect from December 1, 2020, every GST invoice issued by businesses with annual sales above INR 500 crores should carry a dynamic Quick Response (QR) code. Scanning the QR code should display invoice details, supplier information, and payment details. If such a business provides an invoice without a QR code, it may be considered invalid and should be verified.
How To Report Fake GST Bills?
If you suspect a fake or fraudulent GST bill, it is crucial to report it to the authorities to combat tax evasion and safeguard your interests. The following are the steps in reporting a fake GST bill:
- Register a complaint on the GST portal
Visit the GST portal (https://selfservice.gstsystem.in/) and click on ‘Report Tax Evasion/Black Money/Fake Invoices/Bogus Billing’ to lodge a complaint. Fill in the requisite details such as the name, address, and GSTIN of the suspected defaulter, a description of the alleged fraud, the estimated tax amount involved, and the period for which it took place. You can also upload supporting documents and share additional information to substantiate your complaint. Ensure that you enter accurate and complete information, and be prepared to furnish supplementary information if called upon by the authorities.
- Report the matter to the relevant jurisdictional authorities
Depending on the suspected fraud’s location, you can also approach the relevant state commercial tax department or the central tax authorities to register your complaint. They may ask for specific details related to the suspected fraud and may launch an investigation based on your complaint.
- Maintain confidentiality
Since tax evasion is a criminal offense, reporting it to the authorities is a sensitive matter. It is essential to maintain confidentiality and refrain from discussing it with the suspected defaulter or alerting others who may have vested interests. The PST (Protective System for Tax) ensures anonymity for whistle-blowers, so you don’t have to worry about facing any backlash.
It is not only important to be aware of how to spot fake GST bills but also to report any fraudulent practices to the authorities. This will help the government in combating tax evasion and ensuring better compliance in the tax system. Being vigilant and responsible taxpayers will contribute to the overall success of the GST system and the growth of our nation’s economy.