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Government tweaks GST rules for claiming input tax credit

GST rules

Govt’s GST rules to claim input tax credit

GST rules – In the event that their suppliers fail to deposit the requisite tax by September 30th, GST taxpayers would be compelled to reverse the input tax credit (ITC) claimed in the previous fiscal by November 30th, according to the Finance Ministry. However, after the supplier has deposited the taxes, the taxpayers can claim the ITC again.

To make the new provision effective, the ministry added Rule 37A to the Central Goods and Services Tax rules. “Where a registered person has claimed input tax credit, 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 until September 30…, the…input tax credit shall be reversed…on or before November 30 following the tax period in which the…return in Form GSTR-3B has not been furnished by such supplier.”

Abhishek Jain, Partner Indirect Tax at KPMG in India, stated that the introduction of Rule 37A bears notice because it outlines the circumstances and process by which ITC must be reversed in the event that the supplier fails to pay taxes.

GST rules

Companies should pay attention to these changes and adjust their business procedures accordingly, according to Jain. Rajat Mohan, Senior Partner at AMRG & Associates, claimed that due to two factors, this move will only be advantageous in certain lawsuit scenarios. “First of all, it is simply a hypothetical change that won’t produce any benefits until the fiscal years 2021–2022. Second, relatively few situations will meet the requirements outlined in these rules, “added Mohan.

While the GSTR 1 would record the specifics of the supplies made by the seller to various buyers, according to Saurabh Agarwal, Tax Partner, EY, it would be very challenging for the buyer to determine whether the seller had discharged the tax on the GSTR 3B against their invoices or not because the said return doesn’t record invoice-wise tax payment. “The newly established changes would place even more responsibility for compliance on the person receiving the goods or services. It is advised that business consider digitalizing this compliance procedure through IRP or ASPs to prevent unwarranted leaks in the system “Agarwal continued.