The Central Board of Indirect Taxes and Customs (CBIC) has held the input tax credit (ITC) of entities of ₹ 40,000 crores because of reasons such as mismatch of GST returns, possibility of fake entities, forged documents etc. The refund involves roughly 2,000 entities. The above amount also includes entities that have not filed returns. There are few cases involved where it has been found that traders purchased iron and steel scrap but raised GST bills for garments to exporters, who in turn claimed refund of IGST (integrated GST) paid on export.
The standard operating procedure developed by the revenue department shares data with the ministry which initiate further proceedings and holds refund. According to GST rules, companies are entitled to credits on tax paid on inputs to avoid cascading effect of taxes. But major discrepancies in returns and cases of a large number of frauds is prompting government to take major steps.