Taxpayers are finding it difficult to comply with notices on detailed verification of transitional credit claims made by them under the Goods and Services Tax (GST), as the tax department has asked them to submit large volumes of documents within seven days of receiving the notices.
One such notice seen by FE has asked for “copies of Cenvatable invoices i.e inputs, input services and capital goods for the period 01.04.2016 to 30.06.2017.” This alone would entail hundreds of pages of invoices over a period of 14 months, even as these notices requires a plethora of other documents under 12 other categories of mandatory submissions.
“We have sought 15 days from the department to comply with the notice as it is physically not possible to gather all these documents without impacting the daily business,” a business owner, who has received this notice, told FE on the condition of anonymity. He added that he had claimed transitional credit of Rs 20 lakh on the pre-GST input credits.
In the GST regime, businesses are allowed to claim credit for central taxes (excise and service tax) paid on the stock bought in the pre-GST regime but sold after July 1, when GST came into existence. However, stunning the government, nearly 9.5 lakh assessees have claimed a massive Rs 1.6 lakh crore as such credits till the December 27 deadline.
Suspecting large-scale foul play, the tax department undertook a verification drive, which didn’t yield a conclusive result due to the paucity of manpower required for detailed investigation. As a result, the government decided to select the top 50,000 assessees in terms of the claims for further analysis.
“Tax officers undertaking verification of transitional credit after one year are now forcing the taxpayers to submit detailed documents including copies of invoices from Pre-GST regime in short period of seven days. The notices are loaded with a blunt and upfront denial of deadline extension, which seems to be coercive in nature and hits directly at the core of natural justice principles,” Rajat Mohan, partner, AMRG & Associates said.
As per the notice, a taxpayer selected for the exercise needs to submit “a note on all the goods manufactured/services provided by the company and their treatment in the previous indirect taxation regime vis-a-vis the GST regime”. Besides, the assessee has also been asked to provide service and central excise returns for the April 2016 to June 2017 period.
“….submit above said documents within a week of receipt of this letter. It is to note that no extension of time shall be given to submit the required documents”, the notice said. It added that non-compliance of the letter would invite penal action as per law.