Verify the Authenticity of a GSTIN and Address Issues with Fake GSTINs

Compliance, of in regular course has now emerged as a significant issue for any business in the age of the Goods and Services Tax. One of the compliance features of GST is validation of the authenticity of a GSTIN (Goods and Services Taxpayer Identification Number). Misuse of fake GSTINs has recently gained prominence as a critical concern, causing fraudulent transactions, revenue loss, and consequences under law. This article gives a detailed procedure on how to check if a GSTIN is valid or not, signs of fake GSTIN, reporting the cases, collecting evidence, legal protections, penalties, and cases related to fake GSTINs in recent times.

1. Understanding GSTIN and Its Importance

A GSTIN is a unique 15-digit identification number assigned to businesses registered under the GST system. Its structure is standardized and includes details like the state code, PAN of the business, and a checksum digit. GSTIN is crucial for tracking tax liabilities, ensuring transparency, and facilitating seamless tax collection.

2. How to Verify the Authenticity of a GSTIN

Businesses should have to verify the GSTIN of the suppliers, clients, or service providers to avoid fraudulent transactions as below:

a. Online GSTIN Verification via GST Portal

The GST portal provides a very simple and easy mode way to verify GSTINs:

Go the GST portal (www.gst.gov.in).

Click on “Search Taxpayer” under the “Search” tab.

Enter the GSTIN you wish to verify.

Cross-check the displayed details such as the business name, state, and registration status.

b. Using Third-Party Apps and Tools

Several third-party applications and software solutions offer GSTIN verification services. These tools often integrate with accounting software, allowing bulk GSTIN verification.

c. Manual Cross-Verification

Request your supplier or partner to provide a copy of their GST registration certificate. Match the details on the certificate with those in the GST portal.

d. Cross-Checking Invoice Details

Every invoice should be issued under GST and contain the GSTIN of the supplier. Compare the GSTIN mentioned on the invoice with the one registered on the GST portal.

3. Common Signs of a Fake GSTIN

Detecting a fake GSTIN requires vigilance. Some common indicators include:

Invalid Format:

A GSTIN that never follow the standard 15-character format is likely fake.

Mismatched Details:

If the GSTIN details on invoice or purchase orders do not match on the GST portal, it should be treated as red flag.

Inactive Status of Registration:

If the GSTIN is marked as inactive or cancelled on the portal, it should not be used for transactions.

Few and far between Business Names or Addresses:

Unusual Business Names or Addresses: Verify if the business name and address are unusual and/or irregular.

Missing Tax Filings:

Suppliers using fake GSTINs often fail to file regular GST returns, which you can verify by asking for GST filing proof.

4. Reporting a Fake GSTIN to Authorities

If you suspect a GSTIN is fake, it’s essential to report it promptly. The steps include:

a.Filing a Complaint via GST Portal

Select “Report Issues or Complaints.”

Provide details about the suspected GSTIN, including its use in invoices or transactions.

Attach any supporting documents, such as invoices or communications.

b. Informing the GST Commissionerate

You can directly approach the GST Commissionerate in your jurisdiction with a written complaint.

c. Reporting Through Anti-Fraud Helpline

The government has set up helplines to assist businesses in reporting GST fraud. Details can be found on the GST portal.

d. Anonymous Reporting

If you wish to remain anonymous, use the "Contact Us" option on the GST portal to share your concerns discreetly.

5. Gathering Necessary Evidence and Documents

To strengthen your complaint, collect the following:

Invoices with Fake GSTINs:

Include all relevant invoices that display the fake GSTIN.

Correspondence Records:

Emails, contracts, or agreements with the entity in question.

Bank Statements:

If payments were made, attach proof of transactions.

GST Filing Proofs:

Documents showing the fake GSTIN was used in transactions.

Take Screenshots or Photos:

Evidence of the fake GSTIN being displayed on websites, shops, or products.

Make sure all documents are properly organized and clearly presented to help with the investigation.

6. Legal Protections for Victims of Fake GSTIN Fraud

Sufferers of GST fraud are protected under various provisions of the GST law and the Penal Code. Key protections include:

Refund of Taxes Paid:

If a business has unknowingly dealt with a fraudulent entity, it may claim refunds or adjustments.

Penalty impost for Genuine Errors:

GST law separates intentional fraud from accidental errors, ensuring businesses acting honestly are not punished.

Civil Cure:

Businesses can file civil lawsuits to reclaim losses caused by the fraudulent party.

Protections for Whistleblower:

People who report GST fraud are protected by anti-corruption laws from being punished or harmed.

7. Penalties for Using or Issuing Fake GSTINs

The government has imposed stringent penalties to deter GST fraud. These include:

Monetary Penalties:

Up to ₹10,000 or the tax evaded, whichever is higher.

Imprisonment:

For severe cases, imprisonment up to five years is possible.

Cancellation of GST Registration:

Businesses involved in fraud risk losing their GST registration.

Blacklisting:

Suppliers or businesses using fake GSTINs may be blacklisted, impacting their future operations.

8. Recent Cases Involving Fake GSTINs

Case 1: Nationwide GST Fraud Crackdown (2023)

Authorities found a group creating fake GST registrations for over 10,000 businesses. This fraud caused a loss of ₹50,000 crores in revenue. Some people were arrested, and strict audits started.

Case 2: Nationwide Action Against GST Fraud (2023)

A businessman in Maharashtra was arrested for creating fake GST numbers and issuing false invoices. This allowed others to wrongly claim Input Tax Credit (ITC). The case showed the need for strong verification systems.

Case 3: E-commerce GST Fraud

Some online sellers were caught using fake GST numbers to avoid paying taxes. This led to changes in e-commerce rules, making GST number verification a must for all sellers.

Case : Recent Highlight of news papers in 2024

Police in Pune have registered a case against eight individuals, including mastermind for setting up 246 fake companies to evade GST worth Rs 5,000 crore to Rs 8,000 crore. The group used forged documents and fake firms to commit fraudulent transactions. (28.10.2024)

CGST Mumbai Busts ₹140 Crore Fake Input Tax Credit Rackets in Thane and Palghara (11.10.2024)

9. Steps to Prevent Fake GSTIN Usage in Your Business

a. Conduct Regular Verifications

Periodically verify the GSTINs of your suppliers and partners.

b. Implement Internal Controls

Develop a compliance checklist for GST-related transactions, including GSTIN validation.

c. Educate Employees

Train your finance and procurement teams to detect fake GSTINs and report suspicious activities.

d. Use Technology

Leverage GST-compliance software for automated GSTIN verification and reporting.

Conclusion

It was suggested that dealing with "Verify the Authenticity of a GSTIN and Address Issues with Fake GSTINs" requires a proactive approach. By verifying the authenticity of GSTINs, staying alert to signs of fraud, and reporting issues quickly, businesses could protect themselves from financial and legal risks. It was also mentioned that understanding the legal framework and recent cases would empower businesses to tackle GST fraud more effectively. In doing so, it was pointed out that businesses would not only protect their own operations but also help build a stronger and more transparent tax system.

Verify the Authenticity of a GSTIN and Address Issues with Fake GSTINs