More Conditions laid down to claim ITC in GSTR-3B by CBIC

CBIC is looking for all possible means to curb the fake ITC flow menace. It becomes evident from the recent restriction imposed for claiming the provisional tax credit in GSTR-3B. Now it is further restricted to 10% compared to 20% as allowed earlier.

More powers have been given to tax officers to keep a check on the input tax credit lying unutilised in the electronic credit ledger and can block the same. CBIC released the notification on 26 December 2019 in Notification number 75/2019. These rules will be made effective from the date of their publication in the official gazette.

Accordingly, a new rule 86A has been inserted in the CGST Rules, 2017. Any officer or a Commissioner, not below the rank of Assistant Commissioner may exercise these powers.

If such an officer has a reason to believe that the ITC claimant is involved in fraud or the ITC is not genuine may block the utilisation of such credit. The reasons have been listed down in the rule 86A.

Also Read: Government introduces e-invoice system to check fraud ITC claims

First of the reasons mentions that if the invoice is issued by a seller who is found to be not existing or not conducting business, credit can be blocked. On the other hand, if the buyer availing the ITC is found to be not existing or not doing business, credit utilisation can be stopped.

Secondly, where the credit is being availed without receiving or sending out the goods or services or both, then it can qualify as a valid ground for blocking the tax credit.

Also, non-deposit of ITC by the seller with the government can be another essential ground for restricting the debit from electronic credit ledger. Further, the buyer cannot claim the tax credit without a valid GST invoice or credit or debit note on hand. Such ITC will not be allowed to be utilised.

The Commissioner must record the reasons in writing for disallowing the debit from electronic credit ledger or the blocking the refund of the same. However, there is no mention of allowing taxpayers to speak up or justify before imposing the restriction.

However, the taxpayers can submit pieces of evidence to prove the genuineness of ITC claims. The officer will remove the restriction on being satisfied that the conditions laid down have complied. A period of one year has been laid down for proving the same. After that, any claims will not be accepted.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in