The industry has asked that interest be paid on the inappropriate input tax credit, which was profited however not used under the goods and service tax (GST) administration, be returned.
Meanwhile, in the recent meeting, the GST Council liberated these credits from interest rates from July 1, 2017, when GST was entered. Although, it did not clarify whether interest so far paid will be returned. Sandeep Sehgal, director, tax and regulatory, AKM Global, a tax and consulting firm, said, “The treatment needs to be clarified where the taxpayers have already paid interest.” Abhishek Jain, the tax partner at EY, asked the question is whether a return would be paid to those taxpayers who already have executed interest in such situations.
“The government should come up with explicit clarity for such taxpayers as well and allow refunds to compliant taxpayers, he said”
The tax of interest on availed, however, the non – functioning input tax credit is a subject of significant conflicts in GST since its prosecution.
The credit profited remains as a book entry and resources would be at no loss until it is used for payment or taken back as the return Sehgal said. He also stated that levying interest on them has caused many discussions and actions. This has now been said by the council at its fresh meeting in Lucknow. The council has also decreased the rate of interest from 24 per cent to 18 per cent on inappropriate input tax credit availed and utilized.
Since the council fix not to raise the interest on these inappropriate input tax credits, those who previously paid interest may take resources to Article 265 of the Constitution, which shows that no tax can be levied except by the authority of law, said Sehgal.
But, there Should be Clarity Under the GST laws as Well, He Said
Section 17 (5) of the central GST Act gives a list of situations where input tax credit will not be serviceable. These indulge outdoor catering, beauty treatment, life, and health insurance, and travel perks stretched to employees on vacation like leave or home travel acknowledgement.
