Exclusive: GST Council may approve process changes to plug fake ITC claims in July 11 meet: Officials

Fake invoicing means invoices are issued even when there is no real supply of goods or services.

The Goods and Services Tax (GST) Council in its upcoming meeting on July 11 is likely to discuss and approve changes in the process to plug fake input tax credit (ITC) claims. The changes will entail listing out parameters for risk profiling of entities followed by physical verification, senior government officials said.

“Process changes will require GST Council's approval. Changes in verifications and process streams will be discussed by the Council in the next meeting to check fake ITC claims. Process changes will include risk profiling of entities based on parameters followed by physical verification of risky ones,” a senior government official told Moneycontrol.

With the process change, using part technology and part enforcement the impact will be seen over FY24 as a lot of gaps will be filled, the official said.

The 2023-24 Union Budget has projected a 12 percent growth in GST revenue for the Center at Rs 9.56 lakh crore from the previous fiscal mop-up of Rs 8.54 lakh crore.

Fake invoicing means invoices are issued even when there is no real supply of goods or services. These invoices are then used to avail of input tax credit (ITC). Entities even obtain fake registrations under GST to obtain ITC, which causes revenue loss to the government.

The Council in its meeting will decide on the parameters to be applied online based on which physical verification will be done. The parameters will be industry and location-specific, for example, certain industries are not possible in certain areas.

The government is looking at effectively using data analytics for the clean-up of the registered entities to red flag the risky entities based on these parameters. The entities, which are flagged as risky will undergo mandatory physical verification to ensure physical infrastructure is there.

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

The Central Board of Indirect Tax and Customs has already identified 60,000 entities for physical verification. It has found fake input tax credit claims of Rs 15,000 crore in a special drive that they are undertaking to identify bogus entities, its Chairman Vivek Johri had said earlier.

“So far, physical verification has been done for 43,000 entities of which 10,000 were found non-existent and bogus, which have claimed Rs 15,000 crore of ITC," Johri had said.

Fake invoicing cases have been detected wherein metal scrap and agricultural items are used for industrial use, another senior government official had told Moneycontrol earlier.