Can modifications in GSTR-3B format put an end to fake invoicing menace?


By Archit Gupta 

Credit and Finance for MSMEs: The fraudulent Input Tax Credit (ITC) claims have been on the rise, especially with the uncovering of many fake firms which were set up to issue fake invoices. This may have prompted the government to consider a revision in the GSTR-3B format to curb and combat the fake ITC claims.

GSTR-3B, a summary statement and monthly GST payment form, has staggered due dates (20th, 22nd, and 24th of each month) based on the taxpayer’s category. Currently, the taxpayer has to report the ITC available, ITC reversed, net ITC available and ineligible ITC in GSTR-3B. The portal auto-populates the ITC available figure from GSTR-2B, and the taxpayers are allowed to edit the figures.

Proposed modifications in GSTR-3B

Although the GSTR-2B was introduced to provide insights to the taxpayers to claim eligible ITC alone, there is no mechanism to monitor that in GSTR-3B. It may be due to this reason that the revised GSTR-3B format may include new fields such as gross ITC due to the taxpayer, ITC claimed in a given month, and the net ITC remaining in the taxpayer’s ledger etc.

It is expected that the new fields will work as monthly ITC reconciliation for taxpayers and also help the department in identifying taxpayers claiming ineligible tax credits. The Council’s law committee is focusing on streamlining the GSTR-3B so that there is clarity on the disclosure of the availability and actual ITC claims.

The accurate reporting of the gross tax credit is expected to remove the delays in the tax revenue sharing between the Centre and states. Also, it will further fasten the settlement of the genuine ITC claims. The revised GSTR-3B format is expected to be discussed in the next Council meeting.

Government’s actions to curb fake invoicing 

Every other week the department is unearthing the GST frauds worth crores, and fictitious invoices are the underlying documents for such frauds. The fake invoicing problem has been there in India for a long time, and the government is continuously taking measures to curb the same.

The department amended that the taxpayer can’t file GSTR-1 unless the GSTR-3B is not filed. This move resulted in issuing invoices within the GSTR-3B filing date and mitigated the chances of backdated/bogus invoices.

Also, the department inserted section 16(2)(aa), which allows ITC claims only if the vendors report the invoice or debit note in their GSTR-1 or Invoice Furnishing Facility (IFF). Also, the uploaded data has to then be reflected in your GSTR-2B.

The 45th Council meeting decided to remove the provisional ITC completely, and CBIC amended CGST Rule 36(4) accordingly with effect from 1st January 2022. So, now, you can only claim ITC to the extent available in GSTR-2B.

These amendments nudged taxpayers to perform frequent, dynamic, real-time reconciliations of purchase data for effective and accurate ITC claims. Also, taxpayers must discipline the defaulting vendors by holding payments at an invoice level or at least the GST amount.

More strict measures  

Invoicing is an essential activity, and the number of invoices issued varies as per the size of the business. Department may not verify every invoice, but it can deploy timely reconciliations between the invoice data and the e-way bills or e-invoices data wherever possible.

These can help them in identifying the gaps, such as a fake invoice being issued but never raised the e-way bill as there is no actual movement of goods. Also, the department has to deploy technologies such as trend analysis to identify abnormal invoicing by taxpayers.

The department can conduct surprise physical checks at business places according to the results from the above procedures. Also, the officers shall consider the inventory/stock lying at the business place and compare it with the GST records to find out the under-invoicing scenarios. 


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