Chandigarh, October 15, The Centre’s recent notification, restricting the input tax credit (ITC) to 20% for an entity if its supplier has not uploaded relevant invoices, has not gone well with MSMEs of the region. The government has introduced the new rule to keep a check on fake ITC claims.
However, already reeling under slowdown and credit crunch, the MSMEs feel it will affect block their working capital and enhance compliance burden.
Input credit means at the time of paying tax on output, the seller can reduce the tax which he has already paid on inputs. For instance, if tax payable on output is Rs 1,000 and tax paid on input (purchases) is Rs 800, the manufacturer can claim input credit of Rs 800 and need to deposit Rs 200 in taxes.
According to the notification, ITC to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of Section 37, shall not exceed 20% of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers [in Form GSTR-1].
“The cap of 20% shall be Act wise and not accumulated input tax credit. This means that the taxpayer has to work out 20% for CGST, SGST and IGST separately. In case the vendor has wrongly entered the place of supply and has paid taxes under wrong head, the recipient shall not be able to claim the ITC till it is rectified by the corresponding vendor,” said Keshav R Garg, a tax consultant.
The northern region is the hub of MSMEs with nearly three lakh units across Punjab, Haryana, Chandigarh, HP and J&K.
“Previously, companies were allowed to self-assess their ITC claims on the basis of invoice copy, without any such restrictions as notified recently. Now even in case of slight mismatch, the ITC will be upheld and affect buyer-seller relationship besides blocking precious working capital,” said Badish Jindal, president, Federation of Punjab Small Industries Association.
Industrialists rued that the MSMEs were already facing hurdles in claiming ITC and with this new notification they would have to go extra mile to ensure that vendors upload their invoices so that they can claim the tax amount paid on inputs or purchases. The GSTR-2A is a purchase-related tax return that is automatically generated for each business by the GST portal when a seller files his GSTR-1. “So, the amendment may bring an incumbent task of regularly matching ITC details of taxpayers with those appearing in his GSTR-2A return,” said another tax consultant.
Published On : 15-10-2019
Source : Tribune India
