Skip to main content

Cos Face Queries Over Input Tax Credit Claims

India Inc could face a tax landmine with authorities beginning to question input tax credit claimed by companies in lieu of Goods and Services Tax paid by their vendors. The authorities have already started sending notices to businesses, confirming fears that scrutiny will increase in the new financial year as the government looks to plug leakages. Experts said notices have been sent in Gujarat, Telangana, Andhra Pradesh, Haryana and some other states.
The issue has its origin in the provisions of the GST law that warrant a reversal of input tax credit claimed by a business if its vendor has not paid the tax for which credit is being claimed. Currently, there is no mechanism to ascertain if vendors have paid GST. The GST Network Portal allows viewing of the return-filing status of a registered person, but payment of tax cannot be determined. At best, buyers can only verify whether vendors have included the invoice in their GST filings.
Effectively, while a business may have paid the tax to a vendor for which it wants to claim credit, it may not be possible to ascertain if the vendor has deposited the GST. “In such a situation, requiring the buyers to forgo their input credits when they have already paid the GST to vendors and exercised due diligence to the extent possible does not seem like a fair proposition,” said Pratik Jain, national leader indirect tax at PwC.
Jain said given the stakes involved, the issue is likely to result in litigation. “The government needs to perhaps review the law and amend if they deem it appropriate. In any case, there should be some guidance provided to the taxpayers as to how the government expects them to ensure that vendors have indeed paid tax,” he said. Experts said there is a need for a facility to avail of non-reconciled input tax credits on a provisional basis as companies are compelled to pay in cash and block working capital.
Adequate safeguards to check misuse of the facility such as a time limit to complete the pending compliance/reconciliation can also be prescribed to protect revenue,” said MS Mani, a partner at Deloitte India.They said this will induce more compliance.“This will push the sellers to be more compliant and make the buyers put robust processes in place lest they lose credits,” said Bipin Sapra, a partner at EY.
The Economic Times, 30th April 2019

Comments

Popular posts from this blog

Budget: Startup sector gets new Fund of Funds, FM to allocate Rs 10K cr

  The Indian startup sector received a boost with Finance Minister Nirmala Sitharaman announcing the establishment of a new fund of funds (FoF) in the Budget 2025. The minister unveiled a fresh FoF with an expanded scope, allocating Rs 10,000 crore. The initial fund of funds announced by the government with an investment of Rs 10,000 crore successfully catalysed commitments worth Rs 91,000 crore, the minister said.   “The renewal of the Rs 10,000 crore commitment to the Fund of Funds for alternative investment funds (AIFs) is a significant step forward for the Indian startup and investment ecosystem. The initial Rs 10,000 crore commitment catalysed Rs 91,000 crore in investments, and I fully expect this fresh infusion to attract an additional Rs 1 lakh to Rs 1.5 lakh crore in capital,” said Anirudh Damani, managing partner, Artha Venture Funds.   Damani further added that this initiative will provide much-needed growth capital to early-stage startups, further strengthenin...

After RBI rate cut, check latest home loan interest rates of top banks for loans above Rs 75 lakh

  The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points from 6.50% to 6.25% in its monetary policy review as announced on February 7, 2025. After the RBI repo rate cut, banks such as SBI, Canara Bank, PNB, and Union Bank among others have cut their repo linked lending rates. Most other banks are also expected to cut their lending rates in line with the RBI rate cut. After banks cut their lending rates, their home loan borrowers will have to pay less interest. Normally, when a lender cuts the lending rate, borrowers get two options: Either to go for a reduction in EMIs or reduce the tenure of the loan. The second option will help the borrowers clear their home loan outstanding faster. In case, the borrower goes for reduction in EMI then the lower lending rate of the lender would mean lower Equated Monthly Installment (EMI) for borrowers.   EMI is the amount you will pay on a specific date each month till the loan is repaid in full.A repo rate-linked home ...

GST collections rise 9.9% to exceed Rs 1.96 trillion in March 2025

  Gross GST collection in March grew 9.9 per cent to over Rs 1.96 lakh crore, government data showed on Tuesday. GST revenue from domestic transactions rose 8.8 per cent to Rs 1.49 lakh crore, while revenue from imported goods was higher 13.56 per cent to Rs 46,919 crore. Total refunds during March rose 41 per cent to Rs 19,615 crore. After adjusting refunds, net GST revenue stood at over Rs 1.76 lakh crore in March 2025, a 7.3 per cent growth over the year-ago period.       - Business Standard 02 th March, 2025