GST revamp: Group of state finance ministers for steps to eliminate fake input tax credit claims

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October 23, 2021 3:45 AM

The GoM decided to benefit from international experiences to improve compliance and reporting of B2C supplies, the official said. It was recognised that in order to improve analytics there is a need to take proper feedback from tax administrations to enable adequate learning by the systems in the place.

While misuse of the beneficial provision of ITC under GST regime was the most common mode of evasion under the GST law, the scale if this was worrisome, the government had stated earlier.While misuse of the beneficial provision of ITC under GST regime was the most common mode of evasion under the GST law, the scale if this was worrisome, the government had stated earlier.

A group of state finance ministers (GoM) on IT issues within the goods and service tax (GST) system will likely suggest a mechanism to weed out fake registrants and plug input tax credit (ITC) leakages.

The GoM, headed by Maharashtra deputy chief minister Ajit Pawar, had its first meeting in a virtual mode on Thursday. “It was decided to put in place mechanisms for better verification at the time of registration and weed out fake registrants using artificial intelligence/machine learning-based analytics focused on network analysis and leads for fraud detection,” an official from the Maharashtra government said.

The GoM decided to benefit from international experiences to improve compliance and reporting of B2C supplies, the official said. It was recognised that in order to improve analytics there is a need to take proper feedback from tax administrations to enable adequate learning by the systems in the place.

The members of the GoM also agreed to have suitable checks and balances to tackle menace of fake invoicing so as to regulate input tax credit outflows. Central tax authorities had booked about 8,000 cases involving fake ITC of over Rs 35,000 crore in FY21. While misuse of the beneficial provision of ITC under GST regime was the most common mode of evasion under the GST law, the scale if this was worrisome, the government had stated earlier.

The GoM also decided to call for inputs and suggestions from states on various GST system-related issues. The group has instructed the officers to examine the suggestions and present its analysis along with recommendations before the GoM within a period of one month, the official added.

Among other GST system reforms, the GoM discussed improvement in return filing compliance R-1 (monthly details of all sales) and R-3B (monthly summary of sales and purchases along with tax liability), verification of high risk/high value transactions and creating feedback loop with GST Network (GSTN) to improve analytics.

In the meeting, a brief presentation was made by GSTN and Infosys regarding the various recent upgradations made to the GST system and the way ahead.

The average monthly gross GST collection for the second quarter of the current financial year has been Rs 1.15 lakh crore, which is 5% higher than the average monthly collection of Rs 1.1 lakh crore in the first quarter of the year. “This clearly indicates that the economy is recovering at a fast pace. Coupled with economic growth, anti-evasion activities, especially action against fake billers have also been contributing to the enhanced GST collections. It is expected that the positive trend in the revenues will continue and the second half of the year will post higher revenues,” the ministry of finance said in a recent statement.

The GoM on GST systems was set up on September 24, 2021 to give suggestions to the GST Council from time to time.

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