Sunday, June 12, 2022

Torrents and Bill Trading

Torrents and Bill Trading

Introduction

In this article we are going to explore the similarities between Torrents and Bill Trading. And we will also understand why it is tough to combat Bill Trading and possible ways to minimize it.

Let us first understand basics of Torrents and Bill Trading in simple words.

Torrents:

Torrents are used for file-sharing over the internet. Unlike traditional file-sharing where all people are downloading from one main server, torrents allow all users to share files. So even if main server goes offline or permanently down, we can still download the file from other people who already downloaded the file or part of the file.

Let us understand few terms related to Torrents-

Seeders:

Seeders are those who upload the full file on the internet and allow others to download.

Leechers:

Leechers are those who do not have the complete file, but they are in the process of downloading the file.

Peers:

These are the people who have parts of the file, and they are downloading the remaining parts and at the same time uploading the parts that they have already downloaded.

Bill Trading:

Simply put, bill trading is issuing invoices without actual supply of goods or services. It is used for transferring Input Tax Credit (ITC) from one GSTIN to another.

Similarities between Torrents and Bill Trading:

Both Torrents and Bill Trading are meant for sharing something over the internet. Let us draw an analogy between "Seeders, Leechers and Peers" and "people participating in Bill Trading".

GST Seeders - People who take Fake GST registrations just to show outward supply without any inward supply. They are at the root of Bill Trading chains. They generate the money (ITC) from out of nowhere.

GST Peers - These are the middlemen in the Bill Trading chains. They are neither the generator nor the consumer of ITC. They just receive ITC from seeders and pass it on to other peers and eventually leechers.

GST Leechers - The people who are willing to buy the fake invoices issued by Peers and use this ITC to offset their outward liability.

Problems faced:

  1. The department officers detect the seeders and cancel their registration and sometimes they try to trace them upto a few levels but often find that all of them are non-existent units and it turns out to be a wild goose chase.

  2. No matter how hard the officers try they can never really block all the seeders since by the time they detect 50 seeders, Bill Traders take 500 new registrations, and the cycle continues.

  3. Usually, the seeders, leechers, peers and the person responsible for the fake registrations are situated in separate states. They exploit the delay in communication by the department of different states to one-another.

Conclusion:

Just like stopping the main server in torrents does not stop the file transfer, cancelling the registrations of seeders will not stop the circulation of Fake ITC. Plus, seeders are like the Asur Raktabija - they respawn in larger numbers. The solution to this problem has two parts - 1) Detecting and recovering the already circulated fake ITC from the leechers. 2) Stopping the seeders, peers and most importantly leechers from continuing this.

How the officers are planning to catch the persons responsible is classified (probably something named "Project Kali").

In the end, a message for Bill Traders from Tony Stark, "Not a great plan. When they come, and they WILL, they'll come for you."

Tony