The GST Council has notified that it might consider the CBIC’s recommendations on adding new validations to the GST return filing in order to track evasion and fake ITC claims in its upcoming 50th GST Council meeting scheduled in July.
The action was taken by the Central Board of Indirect Taxes and Customs (CBIC) in response to the reports of many fake ITC (input tax credit) claims detected by many central agencies amounting to nearly Rs 62,000 crore, in response to which more than 700 people, including professionals, were also arrested. Additional validations would help check fraud and revenue loss in the GST return filing system.
The CBIC had earlier introduced certain validations for GST registrations including assigning risk ratings in order to detect and curb the instances of fake entities providing fake invoices to claim ITC in a fraudulent manner. To further eliminate or reduce tax evasion, the authority plans to introduce additional validation for both new GST registrations and return filings.
“We are planning to introduce validations in the returns filing system in such a way that the process does not become cumbersome for honest taxpayers. The validation would be done by the tax department and ITC claims could be blocked in cases of mismatch,” according to an official.
Before the additional validations proposed by the CBIC could be applied they must be validated and approved by the GST Council, which is expected to be discussed in the next council meeting scheduled on July 11. The CBIC Chairman had also earlier hinted that the Council will discuss moves to curb GST evasion, including preventing fake GST registrations and fake ITC claims in its upcoming meeting.
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The Council also launched a special two-month tax evasion drive starting on May 16, under which the GSTN has already flagged around 60,000 GST registrations that could be fake. The physical verification of the business premises of these entities is under process. The officers have so far confirmed and are taking action against 11,140 fake GST registrations, including more than Rs 15,000 crore of GST evasion.
According to a tax expert, the HSN code tagging feature in GSTR-1 for outward supplies could be redesigned to be pre-filled in GSTR 3B, which will allow direct capture of correct data and arrive at the due tax liability. This and many other changes have been suggested by the CBIC in its recommendations, which will be discussed in the GST Council meeting in July.