GST Notice Reply

Overview of Directorate General of GST Intelligence

The Directorate General of GST Intelligence detects and unearths tax evasion and is mandated to carry out investigations and issue show-cause notices in cases of tax evasion and illegal activities of taxpayers. DGGST Intelligence gathers active intelligence on tax evasion of Central Excise duties and Goods and Services Tax and passes relevant information to their field officials. The DGGST is also responsible for investigating cases which concerns inter-state ramifications.

What is the Directorate General of GST Intelligence (DGGSTI)?

Tax evasion means concealing relevant information related to the source and method of income generation from the Income-tax authorities.To ensure that the taxpayer follows a proper taxation system in India, the government has established number of authorities to address the issues of tax evasion and non-compliance. The Director General GSTIntelligence is a law enforcement agency under the Ministry of Finance entrusted to curb tax evasion and improve tax compliance in India.The DGGSTI was reintroduced (earlier Directorate General of Central Excise Intelligence) in a different role after the introduction of the Goods and Services Tax Act, 2017. The agency is part of the National Intelligence Grid (NATGRID). The officers under this organisation are deputed from the Central Board of Indirect Taxes and Customs. DGGSTI keeps vigilance on misuse of the liberalised economic environment by unscrupulous and manipulative elements in trade and business.

Powers and Functions of DGGSTI

In 2017, the Ministry of Finance released an order to restructure the Directorate General of Central Excise Intelligence as Directorate General of GST Intelligence (DGGSTI). The following functions are entrusted with the Directorate General of Goods and Service Intelligence are:

• The DGGSTI is entrusted with collecting, collating information and disseminating intelligence relating to evasion of Central Excise Duty, Goods and Services Tax on a Pan India basis.
• DGGSTI analyses the price structure, marketing pattern, and classification and categorisation of goods and services prone to tax evasion; to advise on plugging the loopholes and proposes changes in policy structure to the Central Board of Indirect Tax and Customs.
• DG GST Intelligence offers coordination in investigating Central Excise Duty, Service Tax, and Goods and Services Tax evasion cases.
• Entrusted to unearth the modus operandi of tax evasion cases relating to Central Excise Duty and Goods and Services Tax.
• DGGSTI shares intelligible data with agencies like the Central Economic Intelligence Bureau (CEIB) & FIU-IND; and with law enforcement agencies including DRI, Income Tax, Enforcement Directorate (ED)&Goods and Services Tax Dept. of the States.
• A complete detailed & updated study of the Taxation Laws and implementation machine to access the possibilities of tax evasion.
• DGGSTI examines the effects and implementation of different tax concessions, exemptions, and relaxations and makes recommendations to the government from time to time to ensure that they do not become a tool of evasion.

DGGSTI Actions in Certain Cases

The DGGSTI has taken cognisance of issues or cases where tax evasion and non-compliance can be observed. For more understanding and clarity over the scope and jurisdiction of DGGSTI, the following issues are mentioned below:

Undervalued Goods and Services

There is a perpetual issue where companies are undervaluing goods and services. The main logic behind the undervaluing of goods and services isthe short/less payment of taxes. Some taxpayers deliberately classify their products to attractthe lowest tax rate of 5 % against classifying products thatattract higher rates under GST. The DGGSTI regularly compares the market prices of the goods and services offered and the actual price mentioned in the invoices.

Fake and Bogus GST Invoices

With growing competition in the economic market, companies are adopting methods to dupe authorities to generate more wealth for the company by creating fake and non-compliant Good and Services Tax invoices for claiming refunds and Input tax credits. An invoice is considered fake and bogus when a registered person claims an Input Tax Credit of the generated invoices which do not satisfy the eligibility criteria as per the GST Act, 2017.

Fraudulent Input Tax Credit

Directorate General of GST Intelligence (DGGSTI) has detected irregularities in claims made under the input tax credit, where a taxpayer has availed integrated GST, and that input tax credit has been refunded to the various non-existent firms. The fraudulent claim of the input tax credit is based on invoices from fake and bogus firms.

Show Cause Notices

A major mismatch has been observed between the no. of show cause notices being served and the conclusion of the cases. The taxpayers are always on the receiving end of it. The multiple no. of show cause notices by DGGSTI can hamper and become a potential hurdle in the company's productivity. DGGSI is also empowered to issue summons to taxpayers.

Recovery of Tax

The CBIC has clarified that the recovery of tax from the defaulters can be initiated only after the issuance of notice or an adjudication order. The concerned officer is refrain from carrying out activities to recover dues during the search or investigation.

The senior tax officers such as the Directorate General of Goods and Services Intelligence (DGGSTI), inquire into any taxpayer complaint about the coercion or use of force by any of their officers at the earliest as per the CBIC.CBIC instructions to officials will reassure taxpayers and will boost business confidence, and give taxpayers an opportunity to present their case before adjudicating and appellate authorities.

Duties of a taxpayer

The summon proceedings are equivalent to ‘judicial proceedings’ as defined under the Indian Penal Code (IPC). Thus, the taxpayers should be cautious while dealing with the GST authorities. DGGSTI officers may call upon the relevant necessary papers and record statements of a business entity's employees/directors/key managerial persons during the summons proceedings.

Wrong Exemptions

CBIC regularly releases exemption notifications for companies making relevant deductions on generated income. There are instances where exemptions are filed wrongly and deductions calculated are equivalent to the company's total earnings. These situations must be addressed accordingly to make detailed and appropriate deductions.   

Fraudulent IGST Refund

Integrated Good and Services Tax (IGST) refunds are issued to exporters automatically based on the filed shipping bills with customs and GST returns filed with central tax authorities on a fortnightly basis.CBIC has observed instances of availing IGST refund with a fraudulent input tax credit (ITC)on the export of goods by some exporters.

GST Notice ReplyServices at Enterslice

Notice and Summons

GST Authorities regularly issue Notices and Summons for verification and inquiry of the default cases. The GST Notice Reply Services by the Enterslice will enhance the understanding and give lucid details over the notices served by the Director-General of GST Intelligence. Appropriate replies are drafted as per the needs and requirements of the companies. GST authorities may also ask for clarification on the legal necessary papers submitted for availing refunds or exemptions.

Assistance in Filing Tax Credits and Refunds

The refunds and credits are filed regularly to remove the taxes that a company has already paid to authorities. The accurate and detailed filing of the application (as per the prescribed format) is necessary for availing Input Tax Credits and Refunds.

Advisory on Actions of DGGSTI

The actions taken by the GST Intelligence wing like issuance of show cause notices, summons, search and seizure are dealt by veteran tax professionals at Enterslice. All the assistance to the companies/firms are in accordance with the rules and provisions of the GST Act and other relevant laws.

Necessary Compliances

Numerous certificates and licences from different regulatory authorities are needed to acquire in order to carry out business activities smoothly. Enterslice will helps an organisation/firm to fulfil specific compliance requirements and avoid situations where a company may attract violations under GST Act and rules.

GST Litigation Services

The litigation services are required by companies to file applications for redressal and relevant necessary papers in tribunals (NCLT) and courtsand to seek an appropriate remedy. An appeal is filed to the appropriate forums for making corrections on the awards granted and against adverse decisions by the tribunals/courts.

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