The GST Council is set to introduce a new rule in the GST law, necessitating businesses to provide justifications for any excess input tax credit (ITC) claimed or make the corresponding deposit with the exchequer. The Law Committee, comprising tax officers from both the Centre and states, has expressed its opinion that when the ITC availed in the GSTR-3B return surpasses the ITC amount available as per the auto-generated statement GSTR-2B, a specified threshold will trigger an intimation to the registered person on the portal regarding the difference. Subsequently, the person will be directed to either explain the difference or pay the excess ITC along with applicable interest.
To implement this provision, the Committee has recommended that it should come into effect when the difference exceeds 20 percent and Rs 25 lakh. A final decision on this recommendation will likely be taken by the GST Council during its 50th meeting on July 11.
Currently, businesses utilize the input tax credit (ITC) received from their suppliers, commonly known as ITC, to offset their GST liability while filing taxes in the GSTR-3B form.
However, in cases where the disparity in tax liability declared in GSTR-1 and GSTR-3B surpasses the specified threshold of Rs 25 lakh and 20 percent, businesses are required to provide an explanation for the discrepancy or deposit the corresponding taxes.
In the backend, the GST Network prepares the auto-drafted ITC statement, GSTR-2B, which indicates the availability and non-availability of ITC for the taxpayer based on each document filed by their suppliers.
As per sources, the Law Committee believes that a registered person should not be permitted to file the monthly statement of outward supplies (GSTR-1) unless they have satisfactorily explained the reasons behind the discrepancy to the tax officer or deposited the excess ITC claimed.
In a recent move to counter tax evasion, GST officers implemented a similar measure last month for cases where there was a mismatch in tax liability declared in GSTR-1 and tax paid in GSTR-3B.
This step aims to curb fraudulent practices wherein individuals wrongfully avail ITC without any actual supply of goods or services by exploiting this channel.
In the fiscal year 2022-23, the Directorate General of GST Intelligence (DGGI) detected GST evasion amounting to over Rs 1.01 lakh crore, double the amount from the previous year. Additionally, they have booked 14,000 cases related to this offense.