The scammers in Uttar Pradesh found misusing the hand pumps to carry out a fake refund scam using the Inverted Duty Structure (IDS) under Goods and Services Tax ( GST ), enabling them to get ₹15.27 crore in fake refunds.
The GST Intelligence Office started looking into a case where three people from Agra were wrongly claiming tax credits on materials for making hand pumps. They were charging 18% tax on these materials but making fake bills for hand pumps, which have a 5% tax rate, and selling them to fake companies. The main accused behind this is now in arested and has admitted to the fraud, paying back ₹5.21 crore voluntarily.
Under IDS, taxes on inputs, taxed at higher rates, can be deducted from the tax on the final product, which is taxed at lower rates, resulting in a refund to the taxpayer. Hand pumps, categorized under IDS, are one of the few goods in the GST regime subject to this structure.
During the current Financial Year 2023-24, the Directorate General of GST Intelligence (DGGI) has a total of 1,700 cases, involving a staggering sum of Rs. 18,000 crore, have been detected, leading to the apprehension of 98 fraudsters and masterminds. The DGGI has employed advanced data analysis tools to uncover these elaborate schemes, highlighting the increasing sophistication of tax evasion tactics.
Inverted Duty Structure (IDS)
The IDS mechanism allows for the refund of accumulated ITC on inputs, which are taxed at higher rates, against the tax liability on the final product, which is taxed at lower rates. This ensures that the taxpayer does not end up paying excess tax due to the inverted tax structure.
The purpose of IDS is to curb cascading taxes and ensure an equitable distribution of the tax burden throughout the supply chain. Its goal is to enhance efficiency and competitiveness by eradicating tax discrepancies that might impede economic activity.
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