Genuine enterprises suffer even as taxmen bust networks of fake entities and bogus input tax credit (ITC) claims running into hundreds of crores of rupees. GST data mismatch between the filings of the buyer and the seller debar the former from claiming ITC.
ITC means GST credit for tax paid on purchase of goods or services that will be used for business – say GST paid on raw material. This ITC value can be reduced from the buyer’s GST liability.
Genuine buyers, due to data mismatch, have to reverse their ITC claims – the sum involved for a large company could run into crores of rupees.
Most ITC-related issues relate to incorrect or non-filing by the supplier, leading GST authorities to conclude that the supplier has not paid the tax, an Advocate, said. In turn, the authorities hold that the buyer (recipient of goods or services) is not entitled to ITC against such a purchase.
Recently, the Calcutta HC, in the case of Suncraft Energy, held that before demanding reversal of ITC from the buyer, the authorities must take action against the supplier. The HC also referred to two press notes issued in 2018, which emphasised that non-payment of tax by the seller does not automatically result in reversal of ITC in the buyer’s hands. However, amendments in the GST law have diluted the impact of this decision.
Advocate, who represented the matter, said, “16(2)(aa) came into effect from 2022. It provides that a buyer is eligible for GST only if the supplier reports invoice details in its outward return (GSTR-1). This gets auto-populated in the buyer’s Form GSTR-2B.”
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