17 Mar 2020Posted By: Mudit Handa

39th GST Council Meeting: Measures against fake ITC claims

The 39th GST Council meeting was held on 14th March 2020 at New Delhi and was headed by the Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman. 

The GST council came out with several relaxations for the taxpayers having GST registration. Many reforms were introduced aimed at trade facilitation and tax convenience. 

However, the council has recommended several measures aimed at curbing of the fake ITC claims made by some taxpayers having GST registration. The GST council had already taken some concrete steps to control such fake GST ITC claims. Making fake ITC claim is now a non-bailable offence

At the 39th GST Council meeting, some additional measures have been recommended in order to prevent such fraudulent claims of GST input credit.

Let us understand these measures in detail.


1. Reforms against fake ITC claims

Several corrective actions have been proposed by the GST council to prevent fraudulent claims of  GST input credit. Those are discussed below:-

  • In order to curb the fake GST invoicing and availing the false ITC, several restrictions are to be imposed against the approval of the GST ITC claimed by taxpayers having a new GST registration. 

  • Now onwards, ITC claim shall be approved only upon a physical authentication of business premises as well as the financial KYC of that newly registered taxable person.

  • Apart from that, a recommendation has also been made to seek the annual information return (AIR) from Banks;

2. Rules for allocation of the GST ITC

The GST council has stated that some notifications shall soon be released in respect of ITC claim in case of business reorganization u/s 18(3) of CGST Act 2017. According to this section, a registered person is allowed to transfer his unutilized ITC to the reorganized business firm in case of business reorganization. 

Those notifications shall be with regard to the following:-

  • Appeals during non-constitution of Appellate Tribunal; 

  • Clarification on GST refund issues; 

  • Clarification on the special procedure for those business persons having GST registration who are corporate debtors as per the provisions of the Insolvency & Bankruptcy Code 2016, and are still undergoing the process of corporate insolvency resolution.

3. Aadhaar authentication for the new taxpayers

As a step further to prevent the fake GST ITC claim by the taxpayers, GST council also recommended operationalizing Aadhaar authentication for those persons who have got new GST registration.

4. Revisions to the CGST Rules 

Key amendments that are to be made to the CGST Rules are as below:

  • Procedure for reversal of input tax credit in respect of capital goods partly used for effecting taxable supplies and partly for exempt supplies under rule 43 (1) (c);

  • ceiling to be fixed for the value of the export supply for the purpose of calculation of refund on zero-rated supplies;

  • To allow for a refund to be sanctioned in both cash and credit in case of excess payment of tax;

  • To provide for recovery of refund on the export of goods where export proceeds are not realized within the time prescribed under FEMA.

These are a few measures against fake ITC claims introduced at the 39th GST council meeting.

Also, refer to 

If you need any further guidance as regards the GST registration or the GST return filing procedure, please feel free to contact our business advisors at 8881-069-069.

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