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June 22, 2023

In its meeting on July 11, the GST Council might approve adjustments to the procedure to stop bogus ITC claims

In its meeting on July 11, the GST Council might approve adjustments to the procedure to stop bogus ITC claims

The method to stop bogus input tax credit (ITC) claims will likely be discussed and approved by the Goods and Services Tax (GST) Council at its upcoming meeting on July 11. According to senior government sources, the reforms will include a set of criteria for risk profiling of companies, followed by physical verification.

“The GST Council must approve any changes to the processes. The Council will explore modifications to verifications and process streams at its subsequent meeting to address fictitious ITC claims. Risk profile of businesses based on metrics, followed by physical verification of risky ones, will be part of the process reforms, a senior government official told Money control.

According to the source, the impact of the process shift would be felt over FY24 as many gaps will be plugged utilising a combination of technology and enforcement.

False invoicing refers to the issuance of invoices in the absence of a genuine supply of goods or services. The input tax credit (ITC) is subsequently claimed using these invoices. To collect ITC, some entities even create false GST registrations, which costs the government money.

The parameters to be applied online based on how physical verification will be carried out will be decided by the Council during its meeting. The parameters will be location- and industry-specific; for instance, some companies cannot operate in certain regions.

Based on these criteria, the government is considering how to efficiently use data analytics for the clean up of the registered firms to highlight the dangerous entities. Risky entities must go through required physical verification to confirm that physical infrastructure is present.

“This year, the average monthly GST collection target for states and the Centre combined could be Rs 1.6-1.7 lakh crore, for which some things will have to be done differently,” the official stated.

60,000 organisations have already been chosen by the Central Board of Indirect Tax and Customs for physical verification. In a special campaign to find phoney organisations, it has discovered false input tax credit claims totalling Rs 15,000 crore, according to its chairman Vivek Johri.

A physical examination has been completed for 43,000 organisations, of which 10,000 were discovered to be fictitious and non existent and had submitted claims for ITC worth Rs. 15,000 crore, Johri had stated.

An further senior government official previously told Money control that fake invoice cases involving the utilisation of agricultural products and metal scrap for industrial purposes had been discovered.

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