TLI Staff
New Delhi: Seeking to contain the menace of fake invoicing and fraudulent passing of input tax credit (ITC), the all-powerful GST Council would today consider a proposal requiring physical verification and KYC of persons taking registration under the new indirect tax regime.
Accordingly, the rules under Central GST (CGST) Act would be amended.
The physical verification would need to be completed before obtaining the registration or within six months of obtaining the registration.
As per the agenda before the Council, in case a person wants to get the required physical verification done within six months there will be restriction on the quantum of ITC he can pass on.
At present, registration is granted in just few days without doing physical verification of the taxpayers. During investigation into cases of illegal ITC claim, the Central Board of Indirect Tax and Customs (CBIC) has found that in many cases the registered taxpayers were untraceable. Fraudulent ITC claims have caused huge revenue losses to the exchequer.
Official sources told Top Lead India (TLI) that the ITC limit for such persons could be Rs 3 lakhs per month.
As per an internal analysis, a total of 12,67,893 new registrations were given in FY19 but of this only 20,302 or 2 per cent registrants had tax liability which was more than Rs 3 lakh on an average in a month.
“The ITC limit of Rs 3 lakhs per month translates into s turnover of about Rs 3 crores in B2B (business-to-business) transaction only while B2C transaction remain unaffected,” the agenda note for GST Council’s 39th meeting said.
“Such registrants would be permitted to pass on additional ITC on deposit of additional amount in cash ledger,” top sources said.
It has been suggested that such taxpayers will not be allowed to claim refunds till the physical verification and KYC compliance get completed.
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