NEW DELHI: In a bid to curb the practice of claiming bogus or higher input tax credit (ITC), finance ministry will bring a major reform to the GSTN system.
In an interaction with this paper, Revenue Secretary Sanjay Malhotra revealed that the flexibility to change the GST liability without changing the input tax will be removed to prevent tax evasion.
“The facility to edit given to the buyers to increase their input tax credit and sellers to reduce their output liabilities without corresponding changes will be removed. This will reduce the problem of bogus firms, non-existent firms, and revenue loss,” Malhotra said. Meanwhile, he also informed that there is no need to implement the reverse charge mechanism to tackle the issue, as the above measure would be sufficient to prevent tax evasion.
According to experts, it would probably take two to three month for the industry to adapt to the changes made in the GSTN System. “Measures to curb bogus input tax credits are welcome. However, it is important for industry to get some time to test and implement the changes,” Pratik Jain, Partner, Price Waterhouse & Co LLP said.
Abhishek A Rastogi, founder of Rastogi Chambers, who has been arguing various such petitions in courts with respect to tax cascading said, “Any mechanism which increases the burden on genuine taxpayers will be subject to judicial review as the unwarranted burden is against the objectives and framework of GST”. He says that under no circumstances, the genuine purchases must be denied credit due to the default of the supplier, added Rastogi.
To curb frauds in GST and increase compliance, the GST formations, under the Central Board of Indirect Taxes and Customs (CBIC) and the State/UT Governments, across the country are carrying out a focused drive on the issue of non-existent / bogus registrations and issuance of fake invoices without any underlying supply of goods and services.