Indian companies are confused on how to claim hundreds of crores ITC for the previous financial year under GST reign that might be lost if they fail to verify the claim with vendor returns.
As the filing of GST return for the month of September 2018, which due date is October 20, 2018.
October 20, 2018, will be the last date to file this claim, whereas, for vendors, the last date is October 31, 2018. A situation is created due to this, where the reconciliation of vendor returns are not available.
To extend the limit, Industry associations represented themselves to the government.
“In the event the tax authorities insist on disallowing input tax credit based on a cut-off date referenced to filing of GSTR-3B, taxpayers will be denied the opportunity of availing input tax credit to which they are rightly entitled to as per the provisions of the Act,” industry body Assocham said in its representation to the finance ministry.
Industry authorities and others like CII also petitioned the government on the matter.
The GST, which came into existence in July 2017 replaced multiple state and central taxes and introduced a new concept matching for claiming ITC.
As per filing on the GSTN portal, to claim credit, a buyer must reconcile ITC claimed with tax paid by the supplier in returns.
Online matching was put on hold due to IT-related flaws and in GSTR-3B or monthly summary return, the claiming of provisional credit on the basis of the proclamation was allowed by the taxpayers.
Reconciliation of ITC provisionally claimed was not carried by most of the businesses.
There are many examples of a supplier for not filing GST for months but the buyer claims ITC to them.
If the supplier does not pay tax to the government then the GST law clearly says that the buyer will be entitled to claim the ITC.
With very few days to go, businesses are speeding up to match the credit claimed with vendor returns. The last date for filing the GSTR-1 was extended to October 31, 2018, by the government last month.
The buyer will need to make corrections in their ITC by October 20, 2018, whereas the vendor can file the corrected GSTR-1 by October 20, 2018. So it is important to complete the reconciliation exercise assuming that vendor will correctly report the transaction or alter the previous return transactions on or before October 31, 2018.
Experts say there could be significant error in vendor returns. “Matching is to be done on an all-India basis and not state-wise. There are numerous cases where vendors have reported the invoices in a wrong state and if a state-level matching is done, there are numerous mismatches, leading to credit loss,” said a tax expert.
