The Government is to pass an amendment under section 49 of GST in which the IT officers will be inspecting the fraudulent nature Input tax Credits made by the taxpayers. The invoices that are furnished by the taxpayers will be checked to be legitimate.
Input Tax Credit Eligible & Ineligible Purchases:
To avail input tax credit the following purchase of good are found to be eligible for the purposes:
- Sale or resale within the state
- Interstate trade or commerce sales
- Used as raw materials, consumable stores or containers or packing materials to be sold anywhere inside the country or abroad
- Used in the execution of works contract
- Used as capital goods while manufacturing or reselling the taxable good
- Used for making 0-rates sales
The following input tax credits are found to be ineligible for the purpose of availing credits:
- Goods bought from unregistered dealers
- Goods purchased from GST registered dealers (Composition Scheme)
- Goods notified in the negative list by respective state governments
- Goods purchased without Invoice
- Goods purchased with Invoice but without a separate mention of the amount of tax
- Goods purchased for manufacturing exempted goods other than exports
- Goods that are in stock which have been taxed previously in an Act though they are categorized as exempted goods under VAT Act
- Goods purchased for personal consumption or received for free as gift
- Goods purchased from abroad
- Interstate goods purchases
- Goods including motor vehicles, furniture, toilet articles etc. that aren’t related to the production of goods or stocked for the purpose of sale/resale
In case of found guilty of giving wrong information about the input tax credit 
A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India refunds, there will be actions taken in terms of blocking the credits. The Government is of the view that in order to stop complicating the process, it is imperative to stop the credit available in the electronic credit ledger from getting a refund of input tax credit or utilizing it for making payments toward output tax
This has further resulted in resentment among traders and companies as they feel traumatized being at the perils of the tax collectors and inspectors. The companies feel the pressure of the whims and fancies which has been unduly being levied on them by blocking their input tax credits by the IT officials.
The companies are of the opinion that the officials should not be given powers that tend to be absolute in terms of blocking the credits. Earlier also, the companies have been protesting against the power to arrest the promoters which have been assigned to the officials if the promoters are found guilty of circular trading in order to avail the input tax credit. The companies are also of demand that if the credits are blocked and after investigation, the charges are found to be irrelevant then, in that case, there should be provisions made for compensating the loss of capital that is done during that period for which the fund has been blocked.
