The issue of circular trading could be taken up by the Goods and Services Tax (GST) Council in its upcoming meeting.
- Circular trading refers to fraudulently availing input tax credit by traders by issuing of invoices without availing any real goods or service.
- In simple words, circular trading refers to the transaction of selling and buying of goods (without actual movement of goods) through shell companies.
- Circular trading is a circular which is being formed by a group of companies engaging themselves in fake sales transaction by producing fake sale invoices.
- The main objective of circular trading is inflating turnover of the business.
- However, through circular trading, companies may also aim to:
- To increase the valuation of the company/business;
- To benefit higher loans from the Banks or Non-Banking Financial Corporation (NBFC);
- To bring black money into the system;
- To avail fake input tax credit.