The Finance Ministry is taking major steps to curb fake input tax credit under the Goods and Services Tax (GST) system. The Revenue Department, under the Ministry of Finance, may restrict any editing or manual intervention in GSTR-3B. A source close to the development told Zee Media, “The GST department is planning to curb fake input tax credit through new regulations.”
The source added that in the first phase, which may kick in from April 2026, GST is likely to freeze the editing of output details in GSTR-3B, where tax liability is declared — this data will directly flow from GSTR-1.
Another source told Zee Media, “From July, which is the second phase of this reform, input tax credit entries in GSTR-3B may no longer be entered manually; they will automatically flow from GSTR-2B.”
Both phases are expected to be completed by July 2026.
Experts feel this is a necessary step to curb fake input tax credit.
Abhishek A Rastogi, founder of Rastogi Chambers, told Zee Media: “The move to curb fake input tax credit (ITC) is undoubtedly important, but it is equally essential that genuine businesses do not suffer collateral hardship. In several legitimate sectors, the ratio of ITC to output tax is inherently high due to the nature of operations. For such businesses, even a short-term blockage or restriction on credit can severely impact working capital and overall cash flow.”
“While the proposed shift to auto-populated GSTR-3B, first for output tax (from GSTR-1) and later for ITC (from GSTR-2B), may strengthen system integrity, the transition must be calibrated carefully. Any mismatch, system delay, or vendor-level non-compliance can unfairly penalize compliant taxpayers, who rely on timely ITC to keep operations running smoothly,” said Rastogi.
“As the July 2026 implementation progresses, the focus must remain on ensuring that the fight against fake ITC does not translate into procedural bottlenecks for honest businesses, whose financial stability depends on seamless credit flow,” he added.
In the last seven years, frauds amounting to more than Rs 2 lakh crore have been detected by the GST department. If the government can curb this fake input tax credit practice, both the Centre and the states will receive a higher share of tax revenue.
Recently, the GST Council raised this issue of fake input tax credit in its meeting.
At the time of publishing this report, the finance ministry was yet to respond to Zee Media’s query. A new GST filing regulation may be discussed in the next meeting.
