DRAFT RETURN RULES REQUIRE DECLARATION OF INELIGIBLE CREDIT

GST Update 30.09.2016

GST DAILY DOSE OF UPDATION:-

DRAFT RETURN RULES REQUIRE DECLARATION OF INELIGIBLE CREDIT:- The draft rules for return have been placed in public domain for perusal by trade and industry. The provisions contained in the Draft Rules are almost the same as communicated in the Joint Committee Report for Business Processes and Draft GST Act, 2016. However, one provision that needs to be pondered upon is the requirement to specify the inward supplies in respect to which recipient of goods/services is not eligible, either fully or partially for input tax credit in Form GSTR-2 where such eligibility can be determined at invoice level. Furthermore, recipient of goods/services shall also declare the quantum of ineligible input tax credit on inward supplies which is relatable to non-taxable supplies or for purposes other than business and cannot be determined at invoice level in Form GSTR-2.

The above provision has been incorporated as under GST regime, the details of inward supplies will be auto populated and it is for the assessee to sort which input tax credit is admissible to them. Moreover, it is clarified that the recipient is required to disclose all ineligible input tax credit whether it can be determined at invoice level or it pertains to non-taxable purposes or for purposes other than business. However, this will create difficult position for assessees as they will be required to determine and ascertain the ineligible input tax credit and will have to report it in the GSTR-2 filed by them. Moreover, the eligibility of input tax credit is a decision which may at times be of interpretational nature. In such cases, the assessees would be in delimma whether to claim it as ineligible credit or not because there is limitation of one year for credit availment in case of inputs and input services. Not only this, whether the demand pertaining to ineligible input tax credit, say if there is difference of opinion between revenue authorities and assessee, will attract extended period of limitation or would be subject to normal period of limitation will be a mysterious question because assessee may plead that he had disclosed ineligible input tax credit was reflected in return filed by him in GSTR-2 and so there was no suppression of facts from the revenue department.

Well, the requirement to disclose ineligible input tax credit will definitely give rise to disputes and litigation.

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GST Update 30.09.2016

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