Taxpayers Face Uncertainty Around the New GST ITC Rule

Earlier this month, a new rule concerning Input Tax Credit (ITC) claims was announced. According to the new rule, provisional ITC was restricted to 20% of the eligible ITC (which is available in GSTR-2A) as in, if a supplier does not upload invoices, a recipient (taxpayer) will not be able to claim 100% ITC.

Starting next week, taxpayers will begin filing their tax returns, and this will be the first instance wherein they will be filing their returns as per the new rule. Most of the taxpayers are waiting for clarity around the notified new rule.

The objective of the new rule was to curb the usage of fake GST invoices which are used for making fraudulent ITC claims. However, since there is no clarity around provisions of the new rule, it has resulted in uncertainty among the taxpayers.

Also Read: ATF and Gas Might Be Added under the GST Bracket

The major confusion amongst taxpayers is about how the government is going to restrict the ITC claim to 20% when a supplier fails to upload invoices on time. As the overall process of invoice matching and GST return filing will be done via the GSTN portal, a need for clarity about the cutoff date/time for matching becomes crucial.

The provision of matching invoices under section 43A has been there from the beginning. But, implementing it was delayed. Finally, this month the GST Council decided to implement this provision after two years of GST introduction. The GST Council decided to enable the provision since the government had identified several cases wherein some of the companies claimed fake ITC.

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

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