A government regulation that disallows companies to take input tax credit if vendor invoices are not uploaded on the GST network is creating problems for the companies, said people in the know. According to the GST law, invoices have to be uploaded on the GST IT network for every transaction for it to be complete and eligible for tax credits.
Companies are claiming that since the rule does not specify the time period of this calculation, it is creating a situation where some companies may end up losing input tax credit if the vendor has not supplied an invoice.
“Restrictions on input tax credits in case of invoices that have not been uploaded by the supplier to 20% of the eligible credits appear to be an anti-evasion measure driven by revenue considerations. However, this means that businesses would need to establish a real time reconciliation mechanism to avoid working capital blockages,” said MS Mani, Partner, Deloitte India.
Tax experts are also complaining that the credit is restricted on the basis of supplier uploading without giving change to the taxpayer to add to details which suppliers have not reported and this could lead to problems during reconciliation. The last date for claiming the input tax credit is October 20, said industry trackers. Many companies are claiming that they would not be able to reconcile the statements as many vendors are not able to give the invoices.
Many companies are also asking the government to extend the date for claiming input tax credit as it could lapse after the due date. “The governance can extend the date or give a clarification around this since this problem is intensified due to the slow IT platform of the GST,” said a tax expert.
“This is unilateral amendment wherein the credit is restricted on the basis of supplier uploading without giving change to the taxpayer to add to details which suppliers have not report. This will be applicable to all the taxpayers,” said Manoj Malpani, senior advisor with Bizsolindia Services