GST: Hassles with the ITC… Never-Ending Story….

 GST: Hassles with the ITC… never-ending story….


GST was executed to draw clarity to the system and prevent cascading effects of the taxes and seamless flow of the ITC. However, even after more than five years, the seamless flow of tax credits has turned into a pipe dream for taxpayers. We now have to contend with, amongst others:

  1. The supplier files correct invoice level data in GSTR-1 and in a timely manner
  2. Payment to suppliers to be made within 180 days
  3. Tax credit on advances paid for services to be taken only after completion of services
  4. Reconciliation of unmatched credits as per GSTR-2B and following up with suppliers for appropriate rectifications
  5. Credits in GSTR-2B are marked as blocked by Government for various reasons
  6. The limitation period for taking tax credits pertaining to a financial year
  7. Blocked credits in terms of provisions of the CGST Act including apportionment of common credits towards exempt supplies
  8. Ambiguities surrounding "personal consumption" and "used in the course of furtherance of  business"
  9. Ensuring tax has been deposited by the supplier.

Further, based on the recent circular issued in December 2022 in respect of mismatched credits for the past financial years 2017-18 and 2018-19, the tax authorities have been enthusiastically sending notices compelling the buyers to provide certification from suppliers and / or their Chartered Accountants to confirm payment of tax to the Government

Writs are piling up in different high courts (HCs) as several businesses are unable to avail the input tax credit (ITC) due to a provision of GST law which requires a taxpayer to reverse the ITC availed if any of its vendors has failed to pay GST. 

In a recent writ filed in HC, Mumbai-based event management company Erfolg has challenged the constitutional validity of the provisions. As per experts, in aggregate the amount involved in such cases would be quite high as many have filed writ petitions in courts across the country.

However, no idea of exact number of such cases but experts affirmed many such cases have surfaced. “There have been several cases where tax has not been paid by the vendor and the credit was availed by the recipient after duly paying consideration and the GST.

In such cases, the statute requires the recipient to reverse the credit and this poses great difficulty on the recipient as the recipient has already paid the entire amount along with tax to the vendor,”


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