GST ITC Restrictions Bring Positivity or Negativity: Analysis Here

Union Budget 2022-23 is based on digitization along with the simplicity of doing the business. The main focus of the budget is on the amendment in the taxes to respond to the hurdles which are being suffered by the assessee. Since the coming of the GST, there are several indirect tax measures that are presented along with the problems for GST ITC claims. Union budget 2022-23 poses a concern on the problem and has presented the assesses move through permitting the re-availing of the ITC on the tax payment through the supplier. However, does this provision in ITC bring advantages or disadvantages?

Overview of Pre-Budget

Sometimes the capital-loaded industries and the unorganized sectors suffered from the issues in furnishing the returns within the given time and doing tax payments because of the fund shortage or because of their business working cycle that gets extended due to the pandemic. Claiming of the ITC for tax paid on their inward supplies would get difficult for the customers belonging from these sectors. GST law loaded the recipient to ensure that the supplier has furnished the tax. When this was absent availing ITC was disputed.

New Update in Budget 2022

Inside the union budget tax reform has been welcomed in which the suppliers do not deposit their tax liability then the recipients are needed to reverse the ITC claimed as well as the subjected interest. Now the recipient would re-avail these mentioned ITC after the supplier performed the payment towards government treasury for the given situations. The same provisions are projected to be advantageous to the assessee. But there are some practical limitations in its executions.

Practical Problems

The recommended sections convey the situations and the limitations to be specified. But the challenge is about the practical issues that are seen by the assessee to find out when their suppliers have performed the GST payment to the government treasury. The GST portal has minor information for ease and shows the voids amid the output tax liability and the actual tax furnished through the suppliers, on an entire level. But the recipient would not find out about the transactions towards which the tax has not been furnished through the supplier and find out the effect of the GST. The suggested amendments must be assisted through enough information along with the GST portal functionality.

Interest, a Dual Levy Under GST

The advantage of re-availing of the Input tax credit is being given on the grounds of the pre-condition that the recipient reverses the input tax credit engaging with the subjected interest. However, the default is on the grounds of the supplier, the defaulter, and the recipient are being penalized by law and treated on identical grounds. The recipient is required to discharge the interest on the ITC availed. The same results in the dual levy interest payment on that transaction.

Interest on Unutilized GST ITC Credit

The new replaced sections utilise the words ITC availed and not availed and utilized towards the intention of the imposition of interest. The government’s purpose is to levy the interest on the undue usage where it is verified by changes of interest payment on net liability with respect to the gross liability. The mentioned purpose is indeed shown in the additional budget announcements. But the only use of the word availed in the mentioned changes might not be in connection with the purpose of the government.

Duration for the ITC Re-availing Under GST

The intention of the provision is to promote the seamless flow of ITC to the bonafide recipients. However, there is a duration to claim the ITC through the assessee the applicability of the mentioned provision is not being fixed. The question that arises in the mind of the assessee is that the prescribed is to be made for the convenience of the taxpayers and might be in the interest of the trade as well as the industry when there would be no duration given for this re-availing of the input tax credit.

Subsequently:

In the provision, there are uncertainties in the provision, and the industry would only expect and wait for the clarifications to manage the integrities of the provision. The same is advised that the assessee should take preventions until the subsequent guidelines from the government get released.

• Clause inclusion on the interest reimbursement to the customer on the basis of the non-payment of the GST through the supplier.
• Moreover the other validation prior to avail the ITC on the invoices of the former defaulters.
• Finding out the suppliers whose output tax liability would be more than the output tax furnished on the information shown on the GST portal.

The deciding factor on the provision is advantages or disadvantages is relied on the clarifications.