India's tax enforcer shift gears to hunt big-ticket fraud, spare the small fry
The Directorate General of GST Intelligence (DGGI) has accorded higher priority to investigating individuals and entities causing major damage to the economy through systematic tax evasion, over issues such as errors in classification of goods or services, two persons with direct knowledge of the development said.
While tax evasion and fraud are already top priority for DGGI, a sharper focus on these is expected to be a stronger deterrent, fetching more revenue to the exchequer while ensuring effective utilisation of time and resources, one of them explained.
This approach will also ensure the industry is spared of investigations by the specialised agency into technical tax matters
The use of shell companies to fabricate bogus transactions and conduct circular trading is among DGGI's top priority areas, the person mentioned above said. Circular trading in this context is when two or more entities manipulate the trade channel to wrongfully claim input tax credit or inflate sales without actual movement of goods.
'In some cases, this has been combined with bank frauds by inflating turnover to get bigger loans as well as stock market frauds by manipulating share prices," the person mentioned earlier said. 'A similar modus operandi of planned GST evasion is by selling goods and services without bills so as to declare lower turnover and pay lower taxes."
Metal scraps, tobacco, and plywood are sectors highly prone to tax evasion, and will remain in DGGI's focus, this person said, adding that clandestine supply of goods and services will also receive high attention.
DGGI did not reply to queries emailed on Saturday.
Ripple-through benefits
Experts said that by focusing on deliberate and high-impact GST frauds, DGGI will create a fairer playing field for genuine businesses, who will no longer face the same level of scrutiny for minor or technical disputes.
'This will free up time and resources for industry to focus on growth and innovation rather than prolonged litigation," said Rajat Mohan, senior partner at AMRG and Associates, a chartered accountant firm.
'At the same time, curbing organised tax evasion will protect government revenues, strengthen the formal economy, and boost investor confidence—benefits that ultimately ripple through to job creation and sustainable economic growth."
DGGI's latest approach reflects the Union government's targeted strategy to check tax evasion and wrongful input tax credit claims while ensuring speedy closure of investigations, quick disposal of grievances and complaints, and faster refunds, as highlighted by finance minister Nirmala Sitharaman at a conference of senior officials last month.
As per official estimates, in the five years through 2024-25, authorities detected more than ₹7 trillion of GST evasion in about 91,000 cases. Of this, ₹1,29,175 crore has been voluntarily deposited by assessees, Union minister of state for finance Pankaj Chaudhary informed the Lok Sabha on 4 August.
In FY25, the extent of evasion detected was ₹2.23 trillion, of which ₹26,799 crore has been voluntarily deposited by assessees, the minister informed.
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