In a lieu to aware businesses about wrongful conduct in input tax credit claim, the Finance Ministry requested the businesses to relook at the claims from earlier tax regime and mentioned that extraordinarily high claims from businesses generate the condition of dishonesty between businesses and the tax authority of India.
The FM has cautioned the taxpayers, who did wrong conduct in claiming input tax credit from the earlier indirect tax regime, to revise the wrong deed before 27 December, which is the due date for making the changes in claims, or the government will treat them for this in a better manner.
The Finance Ministry explained, “Taxpayers who have claimed transitional credit erroneously are advised to avail of the opportunity to revise Form TRAN-1 by 27th December 2017 and ensure that only correct and bonafide credit is availed in transition, failing which the tax administration would be constrained to initiate audit and enforcement action against the identified units.” This proposal to revise the claims is the wise decision of the tax authority to encourage volitional compliance.
Read Also: List of Goods and Services Not Eligible for Input Tax Credit
However, correcting tax credit claims for taxes paid in the earlier tax regime against the new indirect tax, GST liability is permitted, the tax authority is distressed that firms utilizing the benefit of it might go away from the expected manner and it can drastically impact revenue collection under GST.
In addition, the GST council has already revised the tax rates in response to pressure from small businesses and taxpayers and provided some relaxations in tax filing process which is obviously going to postpone higher revenue collections under GST. The purpose of the government behind this shifting is to help firms to be tax compliant instead of applying GST provisions forcefully.
GST council is inspecting large claims of input tax credits which are above Rs. 1 Crore, meticulously. Traders can utilize tax exemptions in the new indirect tax regime in respect of previous tax regime where the tax was paid additionally, they just required to file form TRAN-1 based on the closing balance of tax credit of that time.
The finance ministry mentioned in a statement that some assesses have got additional high transitional credit benefits of CGST which was not in accordance with the provisions of the input tax credit and taxpayers’ rights in the earlier tax regime. It can be the case that some businesses have a bonafide explanation of conduct, some have bonafide mistakes, and some do not have any reliable explanation for some instances.
The Finance Ministry said, “Analysis to identify such units is underway. Such behaviour leads to a breach of trust between the taxpayer and the tax-administration, which is the bed-rock of self-assessment regime in GST.”
Pratik Jain, a partner, and leader of indirect taxes said “Quantum of opening credit claimed has been a concern for the government. Therefore, the press statement nudges businesses to carefully look at their claims and revise it if needed. Large claims would most likely be scrutinized by the authorities in next few months.”