DGGI detects Rs 278 crore GST evasion in railway purchases since July 2017

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The Directorate General of GST Intelligence (DGGI) has detected tax evasion worth Rs 278 crore by bidders who were awarded railway tenders since 2017.

The probe by the investigation agency relates to instances of misclassification of rail supplies by winning bidders of railway tenders, the Parliament was informed.

In March, Business Standard had reported that DGGI has initiated an investigation into tenders awarded by the Indian Railways since July 2017 after complaints were made by the Central Board of Indirect Taxes and Customs (CBIC) and the Department for Promotion of Industry and Internal Trade (DPIIT) to the Ministry of Railways. It was found that bidders were indulging in the malpractice of quoting low GST rate to win bids and evade GST by misclassifying the supplies to the national transporter.

The alleged practice by bidders was to deliberately classify procurement products under Chapter 86 of the GST tariff that attracts a lower tax rate of 5 percent, against classifying such products under Chapter 84 that attracts 18 percent GST.

In its response to a query in Rajya Sabha, Minister of State for Finance Pankaj Choudhary has said 65 cases of evasion has been booked by DGGI since July 2017 to June 2021.

About 12 show cause notices have been issued, and Rs 55 crore has been recovered by the probe body.

To keep a check on evasion, the CBIC’s GST policy wing is also evaluating the legal feasibility of making it compulsory for the recipient or purchaser to mention the HSN code used for classification of items of goods or services being procured in business-to-business transactions. The move is aimed at plugging the loophole in the existing system where bidders are deliberating quoting low tax rates as the current system does not require specifying the GST rate of goods being supplied.

No. of GST case(s) booked

Amount detected (in Rs crore) Amount Recovered (in Rs crore) Notices issued
65 278 55 12

Source from: https://www.business-standard.com/article/economy-policy/dggi-detects-rs-278-crore-gst-evasion-in-railway-purchases-since-july-2017-121072701505_1.html