Two yrs on, GST network continues to be vulnerable

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Two years after its implementation, goods and services tax (GST) continues to be dogged by loopholes. The directorate general of GST Intelligence (DGSTI) has come across a case in which an assessee could secure ten times more input tax credit (ITC) than eligible by just adding one zero in the returns. In the case which involves a city based business, it was found that the company had showed ITC to the tune of Rs 3.5 crore instead of Rs 35 lakh actually available, by just adding one more zero to the figure. The sleuths, on the basis of specific information that the assessee had not filed returns after December 2017, had launched a probe against the company. It was found during the investigation that an excess credit was also claimed by the company for the period in which returns were paid. It was a clerical error because the entry was reversed after six months. The DGSTI has finally raised a liability of Rs 5 crore and recovered over Rs 4 crore from the company which deals in a whole gamut of commodities ranging from electronics to automobiles.

However, that the excess ITC amount could be made available by just a manual entry has also exposed vulnerability of goods and services tax network (GSTN). ITC is the amount which can be adjusted against the final tax liability. It is available on the basis of tax paid on purchase of inputs and services for making the end product. So, the ITC claimed cannot be more than the actual purchases which are mentioned in the GST 2A returns. The ITC to be claimed and final tax liability are mentioned in the GST3B returns. Source say the case shows that the ITC amount can be easily manipulated by simple manual entry. If the online matching system as envisaged originally was put in place, an amount of ITC more than the tax paid on purchases as mentioned in GST2A returns would have been rejected by default in the system. Even as in this case, a deliberate attempt has been ruled out.

Sources say, there is likelihood of fraudulent entries also taking place. The DGSTI office in Nagpur has already got a list of 400 assesses where a similar mismatch has been seen.The amount claimed as ITC GSTR3B and the purchases and tax paid mentioned in GSTR2A are not the same. There is a list of another 400 odd cases in which the GSTR1 which specifies the sales and GSRT3B in which the final liability is mentioned differ. Since there is no system of matching, an assessee can easily reduce the amount of tax payable even if higher sales are mentioned in GSTR1. Sources said, at present the data related to non-filers and mismatch returns is only available at the GST network level. There has been a demand to make it directly accessible at the field level offices under the directorate of investigation and other commissionerate. “Now, as the data comes down the line, there is a time gap,” said sources.

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