June 22, 2021
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Finance

5 ways to identify a fake GST code

From July 1, 2017, GST (Goods and Service Tax) came into fruition. GST is a form of an indirect tax collected by the government from manufacturers, service providers, customers and purveyors of commodities as well as services. The commodities and services for which you will have to pay GST are transportation, clothing, electronics, food and many more. It is an added tax imposed upon the value of the final product and services. In the previous system, there were several different kinds of taxes that needed to be filed and paid by enterprises. After the implementation of GST, all the other taxes were eliminated and one single tax system was imposed upon everyone.

GST codes

After the enforcement of GST law, around 8 million taxpayers migrated from VAT (Value Added Tax) law to GST law. All the taxpayers came under a single authority. Earlier, taxpayers were assigned with an eccentric TIN (Tax Identification Number). Service providers and dealers were under the sole authority of CBEC (Central Board of Excise and Custom).

However, under the GST regime, all the taxpayers were assigned a GSTIN (Goods and Service Tax Identification Number). GSTIN is a unique 15 digit number that improves the efficiency of the transaction process and invoicing. Companies can also avail loans using the GSTIN number. GSTIN number comprises 10 digit PAN number, 2 digit State codes, for signifying the total number of state registration in state 2 digit alphanumeric numbers and at last a checksum value of 1 digit for detecting errors.

The GST state codes were prescribed by the 2011 Indian Census. The number can vary from 01 to 38 from January 26, 2020. To fully utilize the apparatus of GST, companies and taxpayers need to be constantly updated. E-invoicing is also a part of the new GST regime. The implementation of E-invoicing was to make sure the digitalization of the whole taxation process as well as to avoid tax evasions. There have been cases where taxpayers claimed that Input Tax Credit (ITC) was claimed but the tax wasn’t actually paid or filed. And all this was done by using fake GST invoices.

What is a fake GST invoice?

Under the GST regime, it is compulsory for all businesses, suppliers and companies to issue every invoice mentioning the GSTIN details. If any invoice is issued by a valid taxpayer missing the GSTIN and other necessary information, that can be identified as a fake GST invoice. 

5 ways to identify fake GST invoices

Only registered person can charge GST

Unregistered taxpayers can’t charge GST from their customers. Customers should verify whether the GST they are paying is to the registered supplier or not using the GST state codes before making any purchase.

Here is a list of personnel who needs to obtain GST registration before charging taxes:

  • Individual with a turnover of more than 20 lakhs
  • Any inter state supply dealer
  • Ecommerce operators.
  • Any other individual who comes under the GST law

GSTIN is compulsory

Every valid taxpayer has a compulsory GSTIN, it is a unique identification number registered under the GST law. Every invoice must contain this GSTIN for charging GST under the GST state codes.

Properly structured GSTIN

GSTIN is a properly structured unique identification number with individual state GST codes. The first 2 digits represent the GST state codes. The next 10 digits are the PAN number of the business or company. The 13th, 14th and 15th characters of the code are the symbols of business entities, a constant character and an irregular digit code respectively.

Valid GSTIN

To check if the GST you have paid is to a registered supplier or not, you can visit the official GST portal and write down the GSTIN in the invoice to search. 

Exact GST rates

Before paying GST, customers should know about the GST rates they are getting charged with individual descriptions of it to avoid any fraud.

Keeping all this in mind, people need to keep in check if the invoices are not fake or real. To avoid frauds you can use e-invoicing software. E-invoicing software can ensure real invoices.