January 20, 2020

Fake ITC Claims: CGST Departments Has Started Blocking Fake Claims

The Office of Directorate General of GST Intelligence has released a new notification to take actions against fake ITC claims. The DGGI issued the notification in the interest of Principal Chief Commissioners and Chief Commissioners, CGST, asking them to block Input Tax Credit under the 86(1)(a) of CGST Rules 2017. As the rule suggests, the Zonal Chief Commissioners can block or unblock Input Tax Credit availed against fake invoices. The Principal DG has released the notification to take action against the ITC claims issued without the proper receipt of Goods or services. However, the notification suggested some implementation to proceed with the blocking of fake ITC claims.

1. 8 Measures Suggested Through The Notification to Take Actions Against Fake ITC Claims

The DGGI has suggested all the CGST Zones to make a clear list of fake credit availed GSTN wise. Not only that but they have further requested to block the Income Tax Credit under Rule 86A(1)(a) in their jurisdiction in such cases.
If there are any entities located outside the specific jurisdiction, the CGST Zones are instructed to forward the list of such availed. Alongside this, they have asked to forward their GSTN no to the local office of the Principal ADG or ADG DGGGI. So that the concerned authority can block credit of such GSTN immediately.
All the Principal Chief Commissioner or Chief Commissioner needs to appoint an officer of Dy. Commissioner/A.C., rank as a nodal officer. They were further instructed to appoint a few other officers to the team to intervene in the proceedings of blocking fradulent ITC claims.
The 26 Principal ADG/ ADG, DGGI spread over the country were requested to create a Cell in their zone head office. While doing so they need to nominate one AD or DD rank officer as nodal officer. To assist him in the process of blocking the credit of such avails received from their zonal CGST Chief Commissioner they need to nominate a few other officers also.
As said in the notification the Zonal Pr. CC/ CCs need to create the list of fake availers within 3 PM on 15.01.2020. They were further instructed to complete the process of fake ITC claims blocking by 17th January 2020.
In case of outside availers the CGST Zones need to ensure that the concerned authority gets the list by 15th January itself. Henceforth, they can complete the procedure of blocking fake ITC claims within the given deadline of 17th January.
To get the facility of blocking, the nodal officers of CGST Zones and DGGI offices need to contact the Pr. DG Systems office.
The zonal Chief Commissioners and Zonal Pr. ADG/ADG, DGGI need to submit a daily report to the Pr. DG, DGGI HQ, New Delhi.

2. Measures Businesses Can Take to Avoid Blocking of ITC

While the process of the whole credit blocking system still remains volatile, there are certain chances that your valid claim for ITC gets marked as wrong. In this case, our experts have suggested a few measures to avoid the blocking of ITC return for your business. Here is what you must consider,

2.1. Filling Monthly GST return within Due Dates

Filling monthly GST returns within the deadline will definitely help you to keep your image clear as a responsible taxpayer. Hence, your claim of ITC will be less likely to face any rejection or marked as fraudulent.

2.2. Checking whether you have physical copies of invoices with you or not

Having the physical copies of invoices with you is going to help you to showcase proves against your claim. So, try to keep the invoices in original along with you while claiming ITC.

2.3. Reconciling GSTR 2A on a monthly basis

The process of reconciliation involves comparing the data uploaded by the suppliers with your purchase data. The process ensures that the transactions made in a certain business period is in the record. This can ensure the correct declaration under ITC return claim and a maximum credit of input tax for your business.

2.4. Reconciling Eway portal with sales reported in GSTR 1 and GSTR 3B

Your claim of ITC may get blocked if the amount of sales shown in GSTR-3B and GSTR-1 form shows differences as compared with the e-way bill portal. To avoid such differences, it’s essential that you reconcile the E-way portal with sales reported while filing GSTR 1 and GSTR 3B forms.

3. Conclusion

Though the government is trying to take precautionary actions against the increasing claim of fraudulent ITC, the process still remains a questionable one. As different industry trackers are claiming that offering additional powers to tax officers to block ITC claims may create several problems in the upcoming days.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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