GST: Partial Fix For The Issue Of Input Tax Credit Mismatch
The government has issued a circular to resolve the tax credit mismatch issue, but it falls short of addressing its Achilles heel.
Discrepancies in tax credit claimed basis self-declaration versus auto-generated information have been a pain point, ever since the Goods and Services Tax was introduced. Five years later, the government has notified rules to tackle the issue of mismatches of input tax credits, but only partially.
Matching input tax credit had been an issue under GST, especially during the early days, said Abhishek Jain, indirect tax partner at KPMG India. This clarification is much appreciated and aims to resolve input tax credit-related differences in GSTR-3B and GSTR-2A for FY18 and FY19, he said.
The circular has outlined a procedure which will require tax officers to first request details from the taxpayer regarding all the invoices, based on which he has availed the input tax credit in his summary return but which are not reflected in the auto-generated form.
As a second step, the GST officer must then verify whether the taxpayer has met the requirements of the provision containing conditions for availment of the input tax credit.
If the input tax credit claimed, according to the summary return, exceeds the amount reflected in the auto-generated form by Rs 5 lakh, the GST officer would need to ask the taxpayer to produce a certificate from a chartered accountant or cost accountant certifying that supplies were in fact made.
If the tax credit does not exceed the Rs 5 lakh mark, a certificate from the concerned supplier stating that supplies were made by him to the taxpayer, and that tax on them was paid by him would suffice.
For invoices not appearing in GSTR 2A (auto-generated return), jurisdictional officers have been empowered to physically verify invoices to allow/disallow credit in accordance with GST law, Jain said.
While this opens up a resolution channel, it also introduces requirements for robust liasioning. The businesses should proactively peruse this clarification and take certifications wherever required.Abhishek Jain, Indirect Tax Partner, KPMG India
The clarification offers relief in certain situations where the supplier has paid the tax, and there were genuine mistakes in reporting, or the transaction might have got missed out on being reported, said Ritesh Kanodia, partner at ELP. But it does not address the more significant mismatch issue, he said.
The larger issue in this credit mismatch controversy has always been with regards to the recipient claiming credit based on GSTR-1 reporting by the supplier. And if the supplier has not paid the tax subsequently in GSTR-3B, the recipient ought not to be penalised by way of a demand/reversal of credit if he is a bona fide receiver of the goods or services.Ritesh Kanodia, Partner, ELP
The issue continues to remain unresolved, Kanodia said.