SECTION-18: MANNER OF TAKING INPUT TAX CREDIT AND UTILISATION THEREOF- PART-III

GST Update 23.02.2016

GST DAILY DOSE OF UPDATION:-

SECTION-18: MANNER OF TAKING INPUT TAX CREDIT AND UTILISATION THEREOF- PART-III:-

The sub-section 10 states that Notwithstanding anything contained in this section, no taxable person shall be entitled to the credit of any input tax in respect of any supply of goods and/or services to him unless

(a) he is in possession of a tax invoice, issued by a supplier registered under this Act or the IGST Act; and

(b) the tax in respect of such supply has been paid to the credit of the appropriate government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;

The proposed provision pre-supposes possession of tax invoice and payment of tax to the credit of appropriate government for availing the input tax credit. It is submitted that at present, for the purpose of availing cenvat credit, it is sufficient that credit is availed on the strength of original invoice and the tax has been paid to the supplier/service provider. The credit availment cannot be made dependent on the fact that tax has been paid to the government exchequer or not because GST is indirect taxation and it is not possible for the buyer to ensure that the supplier has paid tax to the government or not. As such, the provision that credit is taken of the tax paid to the government account is not practically implementable. Moreover, in digital era when there is talk of paperless offices then requirement of manual invoice is not understandable. Many corporate houses issues only computer generated invoices. This will not be possible if the physical copy of invoice is required for taking credit.

The sub-section (11) states that when there is change in the constitution of a taxable person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provision for transfer of liabilities, the said taxable person shall be allowed to transfer the input tax credit that remains unadjusted in its books of accounts to such transferred, sold, merged, leased or amalgamated business in the manner prescribed. Similar provision is prevalent in Rule 10 of the Cenvat Credit Rules, 2004.

The sub-section (12) states that when the credit has been taken wrongly, the same shall be recovered from the taxable person in the manner as may be prescribed in this behalf. Similar provisions are contained in Rule 14 of the Cenvat Credit Rules, 2004 for recovery of cenvat credit wrongly availed. However, it is worth mentioning that recently significant amendments were made in Rule 14 w.e.f. 01.03.2015 vide Notification No. 6/2015-C.E. (N.T.) dated 01.03.2015 so as to explicitly provide that in cases where cenvat credit has been taken wrongly but not utilised, then only cenvat credit would be recovered. It is provided that the interest would be payable only if the cenvat credit wrongly availed is also utilised. It is hoped that similar provisions are incorporated in the upcoming GST regime also.

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GST Update 23.02.2016

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