News

Published: July 10, 2023
Updated: July 10, 2023

GST Council Proposes Stricter Rules on Input Tax Credit (ITC) Claims

The GST Council is considering revolutionary changes to tackle discrepancies in input tax credit (ITC) claims. Under the new rules, businesses may be required to provide explanations for excessive ITC claims or deposit the excess amount with the exchequer. The proposal aims to enhance transparency and curb fraudulent practices in GST filings.

New Rule on the Horizon:

According to sources, the GST Council is expected to introduce a rule that mandates businesses to justify ITC claims that exceed the amount available as per the GSTR-2B auto- generated statement. If the claimed ITC exceeds a specified threshold, businesses will be notified on the portal and directed to either explain the difference or pay the excess ITC along with interest.

Threshold Criteria:

The proposed provision is likely to come into effect if the difference between claimed ITC and available ITC exceeds 20% and Rs. 25 lakh. The GST Council will make a final decision on this recommendation during its 50th meeting on July 11.

Impact on Monthly Statements:

The Law Committee suggests that businesses should not be allowed to file the monthly statement of outward supplies (GSTR-1) unless they satisfactorily explain the reasons for any discrepancies to the tax officer or deposit the excess ITC claimed. This measure intends to deter tax evasion and ensure accurate reporting of tax liabilities.

Combating Fraudulent Billing:

To combat fraudulent billing practices and misuse of ITC, GST officers implemented a similar anti-tax evasion measure last month. This measure is aimed at reducing instances where fraudsters fraudulently claim ITC without providing actual goods or services.

Special Initiative against Fraudulent Registrations:

In addition to the proposed rule changes, the GST authorities have launched a two-month special initiative to uncover fraudulent registrations. This initiative aims to identify and eliminate any instances of fraudulent activity in the GST system.

The potential implementation of stricter rules on ITC claims by the GST Council signifies a significant step towards enhancing compliance and preventing fraudulent practices. By requiring businesses to explain excessive ITC claims or deposit the excess amount, the proposed rules aim to ensure transparency and accuracy in GST filings. These measures, along with the ongoing initiative to combat fraudulent registrations, demonstrate the government's commitment to maintaining the integrity of the GST system.