SHAKEEL AKHTER
Ranchi, Oct 7: Those involved in creating fake GST bills may now find it easier to evade strict punishment. A new directive has effectively curbed the powers of the Enforcement Directorate (ED) and the police to act independently in such cases.
According to the latest order signed by Dr. Mandeep Kumar Batish, Additional Director (Intelligence), officers of the Directorate General of GST Intelligence (DGGI) must now obtain prior approval from the Principal Director General, DGGI, before filing an FIR under the Indian Penal Code (now Bharatiya Nyaya Sanhita – BNS) or referring a case to the ED for investigation under the Prevention of Money Laundering Act (PMLA).
₹58,772 Crore Lost to Fake GST Bills in FY 2024–25
As per government data, India suffered a loss of ₹58,772 crore in the financial year 2024–25 due to fake GST bills. Out of 30,056 detected tax evasion cases, nearly half involved the issuance of fraudulent GST invoices.
Between April and October 2024 alone, 17,000 establishments were found to be involved in fake billing, causing tax losses worth ₹35,132 crore.
From 2018–19 to 2022–23, authorities uncovered fraudulent Input Tax Credit (ITC) claims worth ₹1.15 lakh crore through fake invoices.
New Rules Clip ED and Police Powers
Previously, DGGI officers could file FIRs at police stations under IPC/BNS provisions without prior permission. The ED would then initiate its own investigation under PMLA based on those FIRs.
Now, the ED cannot register a case or investigate independently unless the DGGI’s Principal Director General approves it.
The order states that DGGI officers must also submit documentary evidence and detailed justifications when seeking such approval.
Because GST Act offences are not listed under the PMLA’s scheduled offences, the ED will no longer have jurisdiction over GST frauds on its own.
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Only Monetary Penalties for Fake GST Bills Under Section 122(1A)
Under Section 122(1A) of the GST Act, those creating fake GST invoices face financial penalties but not imprisonment.
To secure jail time, authorities must pursue prosecution under Section 132 of the Act, which applies to fraudulent activities exceeding ₹5 crore.
Section 132 prescribes:
Up to 5 years’ imprisonment for fraud above ₹5 crore
6 months to 3 years for fraud between ₹2 crore and ₹5 crore
Up to 1 year for fraud between ₹1 crore and ₹2 crore
Earlier, when ED acted under the PMLA, culprits could face 5–7 years’ imprisonment and permanent confiscation of properties gained through fraud.
Government’s Rationale: Avoiding Overlaps, Easing Business
The order explains that the DGGI and CBIC consider the GST Act a “special law” that already contains provisions for penalties and prosecutions.
Since GST-related offences are not part of the PMLA, involving the ED was said to create unnecessary overlap and hinder the ease of doing business.
The circular also noted that requiring DGGI officers to file police complaints under general laws “increases workload beyond capacity.”
The GST Council, it added, has been cautious about imposing criminal liabilities on taxpayers, and the new guidelines are meant to align with that approach.
Key Highlights of the Order
DGGI officers must seek prior permission from the Principal Director General before filing any FIR or referring a case to the ED.
Requests must include facts, evidence, and the accused’s role.
The move is intended to avoid duplication of investigations and maintain focus on proceedings under the GST Act.
The ED will no longer act independently in cases of fake GST bills.
