Overview of Enforcement Initiatives and Outcomes at National Conference of Enforcement Officers

Delve into the insights shared at the National Conference of Enforcement Officers on 4th March 2024, focusing on enforcement initiatives such as National Special Drive, actions by the Centre and State, technology interventions, and policy changes. Uncover details on fake billing structures, motives behind GST evasion, and the successful National Special Drive against fake registrations, including detection of ITC evasion and recovery efforts. Explore the geographical spread of bogus billing cases and enforcement actions by the Centre. Gain a comprehensive view of GST evasion and fake ITC evasion with detailed statistics since 2020.

• Enforcement Initiatives
• National Conference
• Special Drive
• Fake Billing
• GST Evasion

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1. Overview of Enforcement Initiatives and Outcomes National Conference of Enforcement Officers 4th March 2024

2. Agenda Overview of Enforcement Actions National Special Drive Enforcement Action by Centre Enforcement Action by State Technology Interventions and Policy Changes

3. Overview of Enforcement Actions - National Special Drive

4. Structure and Motives of Fake Billing GST evasion Turnover inflation Mastermind Cash Money laundering Generation Bogus firm creation Fake Billing Income Tax evasion Diversion of Funds Businessman 4

5. National Special Drive Against Fake Registrations Initial Risk Analysis 3 months special drive (May-Aug 2023) Follow up Action Enforcement Action (July 23-Feb 2024) 15639 identified. ITC evasion of Rs. 35,655 crore detected. Rs.3,769crore revenue protected recovery and blocking. 133 arrests. bogus firms 50,529 risky GSTINs, 23,200 GSTINs verified. 26% of risky GSTINs non- existent. 14% GSTINs suspended & 19% GSTINs Cancelled. Rs. 6,200 crore evasion detected 76,841 risky GSTINs 28% of risky GSTINs non-existent. 1.55 lakh of recipients of fake ITC identified 14% GSTINs suspended & 15% GSTINs Cancelled Rs. 24,257 detected. by way of crore evasion

6. Geographical spread of Bogus Billing *based on July 2023 to Feb 2024 data of total fraud cases detected. The menace of bogus billing and fake registration is geographically concentrated. 6 States Delhi, Maharashtra, Haryana, Rajasthan, UP, and Gujarat have very high incidence of fake firms. 4 States Karnataka, Tamil Nadu, West Bengal and Telangana have high incidence of fake firms. 6

7. Enforcement Action by Centre

8. GST Evasion 199422 Rs. in Crore 132407 28865 185 33222 75082 185 26575 Total (from 2020-Jan 2024) Detection 50155 321 Rs. 4,57,066 14010 Voluntary Payment 447 Rs. 1,02,672 1,138 Arrest Detections Voluntary Payment Arrests 2020-21 2021-22 2022-23 2023-24 (up to Jan)

9. Fake ITC Evasion Rs. in Crore 31360 24140 28022 31233 3064 158 2484 Total (from 2020-Jan 2024) 153 Rs. 1,14,755 Detection 2027 292 Voluntary Payment Rs. 9,807 2232 429 1,032 Arrest Detections Voluntary Payment Arrests 2020-21 2021-22 2022-23 2023-24 (up to Jan)

10. Case Typology Non-payment of Tax under Reverse charge mechanism Others (Mis- Classification, etc.) Non-payment of Tax, (includes Clandestine removal, Undervaluation Cases), 5 % 10 % Wrong availment/non- reversal of Input Tax Credit 19 % 46 % 20 % Fake ITC

11. Operations against Masterminds & Syndicates Special emphasis to identify and apprehend the masterminds and disrupt syndicates, operating across the country. Case of Habitual offender Masterminds / offenders Arrested under GST laws are again indulging in GST offences after release on bail. Number of Cases 92 Number of fake firms detected 6028 Seven (7) such masterminds/ offenders have been noticed so far. ITC Mis-utilized (Rs.Cr.) 14,039 Recently,Preventive detention of 20 offenders allegedly involved in the Aadhaar-GST fake billing scam, has been done by Gujarat SGST Authorities under Gujarat Control Of Terrorism And Organized Crime (GUJCTOC) Act, 2015 . ITC blocked and reversed (Rs.Cr.) 1,140 Legislative steps needed to effectively deal with habitual offenders. Arrests 127

12. Supply Chain Intervention / Clandestine Removal Major Sectors (April 22 to Dec 23) Detection (in Rs. Crore) Voluntary Payment (in Rs. Crore) Sr. No. No. of Cases Commodity 1 Pan Masala / Tobacco & Cigarette 96 8,021 548 2 Iron & Steel Scrap 455 7,138 728 Timber, Plywood/ Wooden Boards 3 50 215 6 Modus : In one case of Clandestine procurement of packaging material and clandestine manufacture and supply of Chewing Tobacco Detection Voluntary Payment No of Arrest : Rs.2,264 Crore : Rs. 220 Crore : 02

13. Circular Trading Increase in valuation Circular Trading Detection by an Established Business House: 2,736 Cr. Higher loans from FIs Fake ITC Circular Trading Money Laundering

14. Modus Operandi in Service Sector Voluntary Payment (In Rs. Crore) Sr. No. No. of Cases Detection (In Rs. Crore) Major Issues Issue in Brief Availment of Fake ITC, Wrong Availment of Exemption Notification, Undervaluation 1 Work Contract Services 488 3,146 500 The services of supplying of manpower (seconded employees) from the overseas suppliers to Indian entities 2 Secondment 277 3,218 2,523 IGST is leviable @ 18% under RCM Royalty & Trademark Fees by Overseas Commercial Entities Non payment of GST on cross charges,Royalty & Trademark Fees, warranty services, availment of ineligible ITC and Fake ITC 3 26 1,052 942 Non payment of GST- sale of Scrap/Salvage at the time of settlement of motor vehicle insurance claims, Wrong availment of ITC- motor claims settled in Reimbursement mode Compulsory deductible / policy excess - borne by the insured, companies are ineligible for ITC General Insurance Companies 4 18 835 235 Non payment of GST on Co-insurance premium received as a follower & on Re-insurance Commission Reinsurance / Co-insurance Companies 5 15 16,305 25 6 Real Money Online Gaming Short payment of tax by undervaluing taxable services 130 1,18,280 21 7 Casinos Short payment of tax by undervaluing taxable services 13 16,874 -

15. Fake ITC in Established & Reputed Businesses Example I : Insurance Companies: To make payment of higher commission in violation of IRDAI regulations, Insurance Companies made payments to NBFCs / Banks without actual receipt of marketing / sales promotion services. Detection Voluntary Payment Based on the investigation of DGGI, evasion of Rs. 18,000 Crore has also been detected by : Rs.2,895 Crore : Rs. 552 Crore CBDT. They are also taking up this case under Benami Transaction Act. Example II : Construction Company: Fake invoices of works contract service issued by non-existing firms. Detection Voluntary Payment : Rs.231 Crore : Rs. 235 Crore

16. Enforcement Actions by State Maharashtra A Comprehensive Analytical Approach for Tackling Fake ITC

17. MH: Approach and Results (1/2) MHfollows a completelife cycle-basedapproach since2021. It is a end-to-end system based approach and the focus is on early detection. Recovery of fake ITC utilized by beneficiaries Identification of suspected fake entities Declaration of NGTPs/ fake entities Out of 3,160 risky GSTINs forwarded to MH by GSTN, 2,247 had already been taken up! NGTP : Non Genuine Tax Payer

18. MH: Approach and Results (2/2) MH NGTPs # 6,455 ITC Rs 17,063 Cr Outside NGTPs # 3,288 ITC Rs 1,689 Cr Total ITC flow relating to MH: Rs 18,752 Cr 1,689 Cr 3,441 Cr Total flow into MH is Rs 15,311 Cr. Total flow out of MH Rs 3,441 Cr. Outside Beneficiaries # 2,988 ITC Rs 3,441 Cr MH Beneficiaries # 32,734 ITC Rs 15,311 Cr

19. ITC Consumed in Maharashtra ITC Pass- through ITC Rs. Rs. Rs. Actionable amount consumed in MH 15,311 Cr 5,656 Cr 9,655 Cr Fake ITC slab NGTPs % ITC (Rs Cr) Up to 5 Lakh 5 Lakh to 10 Lakh 10 Lakh to 50 Lakh 50 Lakh to 1 Cr 1 Cr To 5 Cr 5 Cr To 25 Cr Above 25 Cr Grand Total 665 260 1,047 679 1,668 565 90 4,974 11.6 18.8 286.0 494.1 3,906.5 5,575.5 5,019.3 15,311.7 87% Only 4,974 NGTPs have passed ITC within MH.

20. MH: Identification of Suspected NGTPs Proactive Approach (Use of SAS Analytical Tool) Local External Intelligence Intelligence Data Marts Data is transformed into actionable marts using SAS Data Integration (DI) Studio SAS BI tools Used to generate risk parameters for identification of suspected NGTPs Own Database Taxpayer data is pulled from GSTN using APIs 02 03 01 Network Analysis SAS Algorithm Second stage NGTPs are also identified using Supply Chain Analysis Inhouse Web based System Centrally selected cases are distributed and confirmed through this system Web Report Studio (WRS) Suspected NGTP published on WRS and available to officers for action 06 05 04

21. Risk Patterns in System Intelligence Focus on early detection earlier the better Registration attributes such as constitution (proprietor) + POB (slum) + nature of possession (rented flat) + sector (iron & steel) Immediately after registration Shared Attributes with declared NGTPs like (PAN/mobile/Email) Abnormal growth in generation of E-Way Bills After 1 month of registration High value E-Way Bills exchanged between newly registered taxpayers Mismatch between Returns and E-Way Bills Spike in ITC passed on / ITC utilized Continuous Analytical Surveillance Negligible cash utilization in discharge of liability Interface with other risky taxpayers

22. Real-time Monitoring Dashboard Live 2,943 WIP 38,662 Field Visits 6,034 GSTINs detected 41,601 Suspected Snapshot As on 29 Feb 2024 Upon receiving initial returns Based on BIFA reports Upon receiving initial E-way bills Immediately upon registration Based on inputs from other States / CBIC Suspected: 41,601 24,434 11,606 903 2,095 2,563 Detection : 6,034 2,588 2,144 92 456 754 Success Rate (%) 10.6 18.5 10.2 21.7 29.4

23. Segregating Real Beneficiaries from Pass-through NGTPs for Targeted Recovery NGTP Suspended Cancelled Active

24. Additional Functionality for Early Detection Electricity Consumer details entered in REG-01 Electricity Bill Verification: For cleaning out fake addresses Data shared with DISCOM No Yes Application Rejected Satisfactory compliance Application Approved

25. Unique Investigation : Busting a Multistate Cluster of NGTPs (1/2) 172 Cr ITC 1,402 122 NGTPs Beneficiaries Spread over 20 states Result of Continuous Analytical Surveillance Sudden spike in ITC Sector : Iron & Steel and Copper scrap Two Master minds arrested from Mumbai Evidence: Multiples anonymous SIMs, forged ADHAAR & PAN cards, Debit Cards

26. Unique Investigation : Busting a Multistate Cluster of NGTPs (2/2) NGTPs : 122 Beneficiaries : 1,402

27. Technology Interventions and Policy Changes

28. Improving the Registration Process: Person Exist 1 Biometric / Face authentication (Biometric live at: Gujarat, Puducherry, Andhra Pradesh) Registration Integration with third-party data for registration risk score: 2 i. PDS v. PFMS (upcoming) ii. Income Tax vi. NPCI (API integration under process) iii. UIDAI vii. Electricity Bill (Pilot operational) Premises Exist Financial Risk Profile iv. Geo-coding

29. Long Term Solution: Locking of Liability & ITC Amendment Locked ITC Liability Liability and ITC are both Locked and cannot be amended GSTR-1A Amendment of outward supply reported in GSTR-1 2B-3B Match 1-3B Match Invoice Management System Facility for Buyers to Accept, Reject, or Mark Invoices as Pending for ITC Control System-driven DRC-01C notices are currently issued System-driven DRC-01B notices are currently issued

30. Credit Limit for High-Risk Taxpayer Definition: Credit limit shall mean the maximum ITC which a taxpayer can pass by issuing invoices before payment of tax. > Credit limit + ITC Available Liability added in GSTR-1 The system checks the taxpayer's credit limit before allowing the GSTR-1 filing. Options Available with taxpayer Deposit Cash in ledger The system will not allow the filing of GSTR-1 if the credit being passed exceeds the available credit limit and ITC OR Visit the jurisdictional officer to increase the credit limit Restriction is imposed only on High-Risk taxpayers

31. Upcoming Analytics To reduce duplication and leverage platform- specific capabilities, a Committee is working on the harmonization of BIFA, Advait & GST prime Dealer Rating Implement a star rating system for dealers in GST, similar to the CIBIL credit score system High Risk Commodity Network Identify high-risk commodity networks and assign scores to them in BIFA New Tools envisaged NGTP (Non-Genuine Taxpayer) GST Prime Develop a platform for tax officers to report non-genuine taxpayers & coordinate follow up investigation. Advait BIFA GST Prime is being extended to all States and Central formations through GSTN Automated Scrutiny Module Implement an automated scrutiny module that is system-driven and based on identified risk parameters

32. THANK YOU!!