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GST Council to Review CBIC’s Proposal: Strengthening Return Filing Process to Curb Tax Evasion

Additional Validations in Return Filing: GST Council Considers CBIC’s Anti-Evasion Measures

In a bid to tackle the issue of fake entities issuing fraudulent bills to claim input tax credit (ITC) benefits and defraud the government, the Central Board of Indirect Taxes and Customs (CBIC) recently introduced validation and risk rating for GST registrations. To further strengthen the GST return filing system and curb tax evasion, the GST Council is expected to review CBIC’s proposal for additional validations, according to a senior official.

Crackdown on Fake ITC Claims and Tax Evasion:
Since November 2020, central agencies have undertaken a special drive to detect and address fake ITC claims, resulting in the identification of fraudulent claims worth Rs 62,000 crore and the arrest of 776 individuals, including professionals. To prevent such frauds and revenue losses, CBIC has taken the step to introduce validations and risk rating for GST registrations.

CBIC’s Strategy for Enhanced Validations:
The proposed strategy involves implementing additional validations during both the registration and return filing processes. These validations would be conducted by the tax department, ensuring that the system is not burdensome for honest taxpayers. If any mismatches are detected, the tax department will have the authority to block ITC claims. The objective is to strengthen compliance and eliminate tax evasion.

Discussion at the Upcoming GST Council Meeting:
The introduction of these additional validations in the return filing system requires the approval of the GST Council. The issue is expected to be discussed in the council’s meeting scheduled for July 11. CBIC Chairman Vivek Johri had previously mentioned that the Council would deliberate on anti-evasion measures to crack down on fake GST registrations and fraudulent generation of ITC.

Recent Drive Against Fake Registration:
Starting from May 16, GST officers initiated a two-month special drive to combat fake registration. During this drive, the GST Network identified approximately 60,000 entities suspected of having fake registrations. Central and state tax officers have already completed physical verifications of around 43,000 entities by visiting their business premises. As a result, 11,140 cases of fake GST registration, involving an evasion of over Rs 15,000 crore, have been detected, and appropriate action is being taken against the perpetrators.

The Role of GSTR-3B in GST Return Filing:
Under the GST regime, registered taxpayers (excluding composition dealers) are required to file a monthly self-declaration return known as GSTR-3B. This return provides a summary of a business’s tax liabilities and includes details of ITC claimed and output tax liabilities. Presently, GSTR-3B comprises seven sections covering various aspects such as GST identification number, legal name, outward and inward supplies, ITC eligibility, exempt supplies, tax payments, and verifications.

Expert Suggestions for Streamlining Reporting:
Experts have highlighted the potential benefits of including commodity or HSN code-wise data in GSTR-3B, similar to the existing feature in GSTR-1 for filing outward supplies. This integration would facilitate seamless capture of data points and enable accurate determination of the tax due. However, smooth transition and effective implementation of any new reporting requirements should be carefully considered to minimize any challenges faced by taxpayers.

CBIC’s proposal to introduce enhanced validations for GST return filing, alongside the ongoing crackdown on fake registration, demonstrates the government’s commitment to combating tax evasion and protecting the exchequer from fraudulent practices. By implementing additional checks and validations, the authorities aim to create a more robust and reliable GST ecosystem that encourages compliance among honest taxpayers while deterring potential fraudsters. The upcoming GST Council meeting is anticipated to provide further insights into the measures being taken to strengthen the GST return filing system and curb tax evasion effectively.

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