Govt tweaks GST rules for claiming input tax credit

GST taxpayers will be required to reverse by November 30 the input tax credit (ITC) claimed in the last fiscal in case their suppliers fail to deposit the due tax by September 30, the Finance Ministry has said.

The taxpayers, however, can reclaim the ITC later following the deposit of taxes by the supplier.

The ministry has inserted Rule 37A in Central Goods and Services Tax rules to give effect to the new provision.

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"Where input tax credit has been availed by a registered person..., but the return in Form GSTR-3B for the tax period corresponding to the said statement of outward supplies has not been furnished by such supplier till September 30..., the...input tax credit shall be reversed...on or before November 30 following the end of the such financial year," the ministry said.

KPMG in India, Partner Indirect Tax, Abhishek Jain said insertion of Rule 37A merits attention as the same provides for the instances and the manner where ITC is required to be reversed in case of non-payment of tax by the supplier.

"Companies should take note of these changes and align business practices accordingly,” Jain said.

AMRG & Associates Senior Partner Rajat Mohan said this change would benefit only select cases in litigation due to two reasons.

"Firstly, it is a prospective change only that will not curate any benefit till fiscal 2021-22. Secondly, very few cases will be able to qualify the conditions stipulated in these rules," Mohan said.

Saurabh Agarwal, Tax Partner, EY, said while the GSTR 1 would capture the details of supplies made by the seller to multiple buyers, it would be very difficult for the buyer to ascertain whether the tax has been discharged by the seller on GSTR 3B against their invoices or not as the said return doesn't capture invoice wise tax payment.

"The amendments made would further increase the onus of compliance on the recipient of goods/services. It is advisable that industry should look at digitalising this process of compliance either through IRP or through ASPs in order to avoid undue leakages in the system," Agarwal added.