The government has asked GST authorities to block input tax credit of about 1,000 taxpayers who have allegedly claimed more credit than they were eligible for, according to a senior official.
The Central Board of Indirect Taxes and Customs has asked every commissionerate to identify top 20 taxpayers who have the highest discrepancy in input tax credit based on the purchase-related GSTR-2A and summary GSTR-3B returns, the official said on the condition of anonymity. GSTR 2A is automatically generated for each business on the GST portal, while taxpayers every month file GSTR-3B that also discloses their credit liability.
All commissionerates will block the input credit for the top 20 taxpayers showing a mismatch between the two returns, the official said, adding they won’t be able to adjust their credit against their future tax liability. Input tax credit is the tax paid on inputs that can be adjusted against future tax liabilities.
The government is increasingly looking to check evasion and plug revenue leakages as it’s falling short of its tax collections estimated in the budget. In December, the GST Council lowered the amount of credit that can be availed to 10 percent from 20 percent if invoices or debit notes are not reflected in GSTR-2A and GSTR-3B returns. That was the second such cut after it capped it at 20 percent in October last year.
The finance ministry didn’t immediately respond to emailed queries.
Coercive steps like blocking input credit of taxpayers are only taken when the government has valid reasons to suspect fraud or tax evasion, said Krishan Arora, a partner at Grant Thornton India LLP. “Having already introduced credit availment restrictions of 10 percent, any further extreme steps like blocking of credit pool are likely to cause undue hardship, at least to compliant asessees.”
The taxpayers identified by the tax authorities will be given an opportunity to explain the discrepancies in returns, the official quoted earlier said. If found guilty, tax dues will be recovered from these taxpayers, he said.
The rationale of blocking the credit clearly seems to be plug cases of fake credits, said Abhishek Jain, a partner at EY India. However, the same should be done judiciously after ensuring that the credits are fake and genuine taxpayers do not suffer, Jain told BloombergQuint.
Published On : 24-01-2020
Source : Bloomberg Quint
