Central, state governments to step up GST refunds scrutiny to curb fake claims

This comes at a time when the government has been witnessing continued shortfall in GST revenue collections.
Central, state governments to step up GST refunds scrutiny to curb fake claims
Central, state governments to step up GST refunds scrutiny to curb fake claims
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The Central and state governments will henceforth become strict with those in the industry and trade claiming refunds under the new GST regime on false premises. In a meeting called by the Revenue Secretary Ajay Bhushan Pandey, officials from the states and centre jointly decided to devise the means to detect such fraudulent refund claims, as per a Livemint report.

The statement put out by the government said the measure will look to curb inverted tax structure refund claims and wanton evasion of GST.

The mechanism will involve compulsorily investigating all fake claims and institute better coordination amongst agencies like the income tax department and GST authorities.

It has been explained that the governments are worried that there is a decline in the revenue month on month while the unscrupulous elements in the trade are taking undue advantage of the loopholes in the system and depriving the government of GST collections.

Lower GST collections have meant the centre is left with insufficient funds to transfer to the states, as per the understanding, to compensate for the losses with the introduction of GST. In an indirect way, the states too have a vested interest in seeing that the GST collections are boosted, and leaks plugged. The setting up of a joint mechanism therefore becomes easier.

The government will also take a serious look at how data can be shared among the GST Council, Central Board of Indirect Taxes and Customs (CBIC), Central Board of Direct Taxes (CBDT), the revenue department and other relevant agencies within the government. This kind of sharing of information is lacking in the present arrangement and businesses take advantage of such loopholes.

For instance, companies put up fraudulent refund claims on GST paid on raw materials which they say they have exported. The government will now investigate if such claims are true by verifying the foreign exchange remittances received in the assessee’s account. Going a step further, the government may insist on the exporter channelling the foreign remittance and the GST refunds into the same bank account. This will also give a semblance of control over the flow of funds and make it easier to detect fraudulent claims.

One may therefore see a series of steps being announced by the governments to implement the decisions taken at the joint meeting. This may happen within this month itself.

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