The Goods and Services Tax (GST) was introduced as a indirect tax reform to mitigate cascading or double taxation in the country. But, experts said the present circumstances under GST, buyers are facing issue of double taxation while claiming Input Tax Credit (ITC) if a suppliers has failed to pay the GST or his registration has been cancelled. For example, a genuine buyer purchases goods or services from a supplier, pays the agreed amount along with GST, and maintains proper documents such as a tax invoice, e-way bill, delivery proof and bank payment records. In such a case, the buyer should not lose the Input Tax Credit merely because the supplier has subsequently failed to pay the GST or the supplier’s registration has been cancelled.

 

If the GST department demands reversal of ITC from the buyer only because the supplier has not paid the tax, the buyer effectively bears the GST once again. At the same time, the department can also recover the unpaid GST from the supplier. This may result in the same tax being recovered twice in relation to the same transaction one from the supplier and again through reversal of ITC by the genuine recipient. CMA Anil B Verma, Past Chairman ICMAI, Nagpur Chapter said that GST is intended to provide a seamless chain of credit and avoid cascading taxes. Therefore, where the dealer or recipient has acted honestly and possesses genuine documents proving the actual purchase and payment, ITC should not be denied automatically. Before reversing ITC, the GST department should establish that the dealer was involved in fraud, collusion or a fictitious transaction. “A genuine taxpayer should not be made to suffer for the default of another person,” he said. “Double taxation is a constitutional violation of law. Therefore, the GST Council should review this issue and give relief to genuine taxpayers,” Verma added.

 

CA Kailash Jogani, Past Chairman of ICAI, WIRC, Nagpur Branch said that if a dealer misses any one condition of claiming ITC, his credit can be blocked or reversed — often before any officer checks whether the transaction was genuine. This is the most common and unfair scenario’s under GST. He suggests that the dealers claim of ITC should be reviewed in the forthcoming GST Council meeting. CA Saket Bagdia, Past Chairman of ICAI, WIRC, Nagpur Branch said that restriction imposed by Section 17(5) of the CGST Act should be restricted to only non business expenses. Also, rate of interest charged under GST is 18% which appears to be much more than even the bank rate and interest levied under other allied laws like Income Tax. He suggested where the taxpayer has satisfied all objectively verifiable conditions prescribed for ITC, an officer should not deny ITC merely on the basis of suspicion, general supplier non-compliance, or a mismatch that can be rectified through the GST portal. “This should be reviewed by GST Council,” he added.