Gujarat GST Detects Major Tax Evasion in MGNREGA
In a recent crackdown, Gujarat GST officials detected tax evasion of over ₹45 crore linked to Central Government schemes like MGNREGA in Dahod and Gir-Somnath districts.
This discovery highlights how loopholes in scheme implementation can lead to revenue losses, and why strict GST compliance is critical for contractors and suppliers handling government-funded projects.
How the Evasion Happened
According to state GST officials:
- Bogus invoices were issued to claim input tax credit (ITC).
- Contractors inflated work bills under MGNREGA and other central schemes.
- Shell firms were used to pass fake credits down the supply chain.
- Funds released for rural employment and infrastructure were partially siphoned off through GST fraud.
Government Action & Legal Reference
Based on Section 67 of the CGST Act, 2017, tax authorities conducted search and seizure operations at multiple premises.
Provisional attachment of bank accounts and properties was carried out under Section 83 of the CGST Act to secure revenue interest.
Similar actions align with recent CBIC advisories to curb fake ITC rackets nationwide.
(Source: Gujarat Commercial Tax Department press release, June 2025)
Key Takeaways for Contractors and Businesses
To avoid legal trouble and penalties:
- Always verify vendor GSTINs on the official GST Portal.
- Do not claim ITC on fake or unverified invoices.
- Keep clear records and proof of work completion for government projects.
- Conduct periodic GST audits internally.
- Stay updated with CBIC circulars on fake ITC cases.
Expert View: Efiletax Insight
👉 Tip: If you handle government contracts like MGNREGA, appoint a qualified GST consultant to review invoices, match GSTR-2B with purchase records, and ensure 100% compliance. Prevention is always cheaper than litigation.
Frequently Asked Questions (FAQ)
Q1. What is the penalty for fake ITC under GST?
Penalty equals the wrongly claimed ITC plus interest and can include imprisonment under Section 132 of CGST Act.
Q2. Can authorities freeze my bank account for GST fraud?
Yes. Under Section 83, tax officers can provisionally attach bank accounts to protect revenue.
Q3. How to report GST evasion?
File a complaint via CBIC’s official portal or approach your local GST office.
Summary
Gujarat GST unearthed ₹45 crore tax evasion in MGNREGA schemes using fake invoices and bogus firms. Contractors must ensure proper GST compliance to avoid heavy penalties and attachment of assets.
Stay Compliant with Efiletax
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