Alert! GST Council could revolutionize your ITC! New GST rules on the horizon; businesses may be required to explain ITC discrepancies Currently, businesses use taxes paid by their suppliers, also known as ITC, to offset their GST liability when filing GSTR-3B tax returns.

According to sources, the GST Council is likely to decide on a new rule that would require businesses to explain the reasons for excess input tax credit (ITC) claims or deposit the amount with the exchequer.

They stated that the Law Committee, which is comprised of tax officers from the Centre and states, has opined that if the ITC availed in the GSTR-3B return exceeds the amount of ITC available in accordance with the GSTR-2B auto-generated statement by a specified threshold,

the registered person may be informed on the portal about the difference and directed to either explain the difference or pay the excess ITC along with interest.

The Committee has proposed that the provision should take effect if the difference is greater than 20% and Rs. 25 lakh. The GST Council is likely to make a final decision on the Committee's recommendation at its 50th meeting on July 11.

According to sources, the Law Committee believes that registered person should not be permitted to file the monthly statement of outward supplies GSTR-1 unless he has satisfactorily explained the reasons for the discrepancy to the tax officer or deposited the excess ITC claimed

In cases of discrepancy between tax liability declared on GSTR-1 and tax paid on GSTR-3B, GST officers implemented a similar anti-tax evasion measure last month.

The measure is intended to reduce instances of fraudulent billing. Typically, fraudsters use this method to fraudulently obtain ITC without providing any goods or services.

The Goods and Services Tax (GST) authorities have already initiated a two-month special initiative to uncover fraudulent registrations.