Latest GST Circular: Experts seek more clarity as doubts persist ahead of the deadline to file return

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Updated: November 14, 2019 10:55:20 AM

GST experts have sought clarification on the latest GST circular issued by the CBIC on Monday.

GST, GST Return ,GSTR 3B, Input Tax Credit, New Input Tax Credit RuleCBIC issued a new circular to clear the air over 20% cap on input tax credit.

GST Return: Tax experts have sought clarity over certain provisions of the latest circular issued by the GST policy wing of the Central Board of Indirect Taxes and Customs (CBIC) on Monday. The circular was aimed at clearing the confusion over the new rules implemented last month that capped the input tax credit claims to 20% over the eligible tax credit. Though the CBIC’s latest GST circular issued on November 11 has come as a big relief for the GST payers as clarified the confusion that this 20% cap will be calculated on a consolidated basis and not the suppliers-wise. However, despite the CBIC covering most of the tricky issues 10 days before the last date to file the GSTR-3B return, experts say, the board still needs to clarify certain points that have been left unaddressed in the latest circular.

In its latest circular, the CBIC has given several scenarios for the ordinary taxpayers and experts, to assess the correct amount of the input tax credit that a GST registered buyer can avail on the inward supplies.

It was a big relief for the GST registered buyers as this tax credit will be availed on the basis of self-assessment but tax experts have cautioned the GST payers, particularly from SME sector that any mistakes in calculation will result in the imposition of interest and penalties on them.

Experts say the CBIC has not clarified whether the amount of restricted credit, 20% over and above the eligible credit where invoice matching has already been done, is applicable to all three GST taxes – CGST, IGST and SGST on a consolidated basis or it will have to be calculated separately.

“The amount of restricted credit claimed during the month is for which tax? Is it to be considered separately for CGST, SGST, and IGST or the sum of all the taxes,” asked Mallikarjuna Gupta, chief taxologist of Logo Infosoft.

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He asked what would be the treatment if the taxpayer has claimed the input tax credit for the IGST only and the suppliers have filed returns on which CGST and SGST are also available.

He says that the ineligible credit in case of the same supplies used for the taxable and exempted supplies will be known at a later stage and the CBIC’s latest GST circular does not clarify how the eligible credit will be determined in such cases.

According to tax experts, the input tax credit available under the GST may account for up to 10% of the total working capital requirements of a small firm in a month. Before October 9, a GST registered buyer was eligible to avail the input tax credit on the self-assessment basis and no invoice and voucher note matching was required.

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The government’s decision to use invoice matching before a GST registered buyer can avail the ITC was seen as a setback for the SME sector. The Union government last month notified rule 36(4) of CGST rules that made it compulsory for the GST registered buyers to match the details of invoices and voucher notes uploaded by their suppliers in their GSTR1 form for outward supplies. The newly inserted rule 36(4) restricts the input tax credit to the credit amount reflected in GSTR2 form auto-populated in the GSTN portal.

However, as a relief measure, the government also allowed taxpayers to avail 20% more input tax credit over and above the eligible amount. Clarity on these issues assumes importance as November is the first month when GST payers will file their first GSTR3 return as per the rule implemented last month.

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