Input Tax Credit: New GST refund rules create confusion as deadline to file first returns comes close

  •  BY Admin
  •  In Tax
  •  Oct 31, 2019
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Millions of GST payers are eagerly awaiting clarity over the new rules notified early this month that restricted the refund of input tax credit to 20% of the total claimed amount. The GST registered businesses will begin uploading their returns from next week and it will be the first occasion when they will file their returns under the new rules governing the refund of the input tax credit, the Financial Express Online reported on Tuesday. On October 9, the GST council notified new rules under section 43 of the GST law that restrict the refund amount to 20% of the claimed amount if the suppliers have not uploaded the correct details in the GSTR 1 form uploaded on GSTN portal. Businesses are expected to face challenges this month onwards due to the lack of clarity on the applicability of this rule, said Pritam Mahure, a Mumbai-based Chartered Accountant. Although the decision was aimed at curbing the use of fake GST invoices to claim input tax credit under GST but the lack of clarity over certain provisions of the new rules has caused uncertainty. “GST returns of October 2019, which will be filed on or before 20th November are going to be the first return after introduction the newly introduced restrictions of 20 percent,” Pritam Mahure told Financial Express Online, adding that lack of clarity over the new rules has created confusion in the minds of tax payers. One of the issues facing the taxpayers is how the government will calculate the 20% amount for refunding the input tax credit. The input tax credit mechanism under the GST was devised to prevent the cascading of taxes. It basically means the government will refund or adjust the taxes paid during the earlier stages of production of goods. However, since the entire system of GST return filing and invoice matching will be done online through the GSTN portal, it requires clarity over the cutoff date or time for matching. “Online credit is a dynamic amount so how to determine 20 percent of it will be another issue to be addressed,” he said. The provision of invoice matching under section 43A was there since the beginning. However, its implementation was deferred. The GST Council finally activated the provision this month, more than two years after the implementation of a common nationwide goods and services tax to enforce compliance. The GST Council decided to implement the provision as the Union government had unearthed a large number of cases in the last two years wherein GST’s inbuilt mechanism of input tax credit to avoid cascading of taxes was misused by some companies to fraudulently claim input tax credit. However, according to tax experts, the decision requires further clarity as only a part of the section 43A has been implemented. 

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