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Clarification About CBIC Notification dated 22 December 2020

On 22 December 2020, the Central Board of Indirect Taxes and Customs (CBIC) notified the amendments made in the GST rules to curb GST fake invoices frauds The Government was pushed to make these amendments to deal with the menace of fraudsters who avail and pass on ineligible Input Tax Credit (ITC).

On 23 December 2020, the CBIC released a set of ‘Myth vs Reality’ to debunk the misinformation spread, about the amendments.

The CBIC has clarified the following 3 statements:

No opportunity of being heard will be given if proper officer believes that registration is liable to be cancelled.

As per the GST laws passed by the Parliament and state legislatures, a Taxpayer’s GST registration is liable to be cancelled if he/she has not filed six or more returns. Therefore, it is not right to say that the GST registration (if) cancelled is without any reason.

This provision has been added in the law to protect the interest of the revenue so that fraudsters do not elope with the GST collected from their customers. The CBIC has clarified that no cancellation of registration will be done without giving a proper opportunity of being heard to the Taxpayer, and this amendment will not affect genuine Taxpayers.

Nevertheless, the department believes that an immediate action for suspension of registration is necessary when unscrupulous operators seek to pass on substantial fake credit by duping the system. However, the suspension may be revoked by the authorised officer based on the Taxpayer’s representation/s.

Even if there is a clerical error in filing returns, GSTIN will be cancelled. There is no option to correct your mistakes.

The CBIC has negated this claim. It has clarified that only in fraudulent cases when there are significant discrepancies noticed (based on data analytics and sound risk parameters, and not mere clerical errors), the act of suspension and cancellation will be taken up.

The board re-iterated that the GST ecosystem is very carefully working towards curbing the fake invoice frauds in the interest of bonafide Taxpayers. It applies sophisticated tools like BIFA, data analytics and AI/ML to pinpoint and segregate these fraudsters.

The proposed change will impact ease of doing business.

The CBIC has refuted this statement as well. The new amendments will not impact the ‘Ease of Doing Business’. The idea of ‘Ease of Doing Business’, in GST, is achieved through the liberal registration process, refund regime and self-compliance system with little or no manual interference. The board believes that these changes are necessary to identify fraudsters and take suitable actions (for suspension and cancellation of registration), after following the due process of law.

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