Blockchain technology to prevent fake tax invoices

The Indian tax department is looking to soon start trials of blockchain technology to prevent fake tax invoices and monitor supply of goods among others, a government official told Business Today Television.

Since an invoice is the most fundamental document needed at every stage of the GST supply chain – from the point of purchase to the filing of returns, blockchain technology could act as the automatic settlement medium that will validate and match the documents between vendors and purchasers. 

In 2020-2021, tax authorities detected goods and service tax evasion of ₹40,000 crore in over a year, largely on account of fake invoices and fraudulent input tax credit claims.

“The Central Board of Indirect Taxes & Customs (CBIC) and National Informatics Centre (NIC) are identifying certain cases where trials could be conducted across the Goods and Services Tax network”, said a government official. 

The government hopes to leverage the decentralised, distributed ledger-based digital, unalterable system of recordkeeping of block chains to plug loopholes and misuse. “Some instances of fake invoices and GST claims have to come to light. We want to utilise block chain technology to prevent misuse”, the official added. 

The government is eventually planning to shift to technology-based compliance completely. “The whole idea behind introducing GST was to make the process simpler and easier for consumers, but our verification has shown instances of individuals and firms claiming fake input tax credit (ITC) through GST claims. This leads to revenue loss,” the official added.  

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