The Central Board of Indirect Taxes and Customs (CBIC) has introduced Rule 86B under the Central GST
Act which restricts use of input tax credit for discharging GST
liability to 99 per cent. “The registered person shall not use the amount available in electronic credit ledger to discharge his liability towards output tax in excess of 99 per cent of tax liability, in cases where the value of taxable supply in a month exceeds Rs 50 lakh,” the CBIC said.
While calculating the turnover threshold, sales from GST exempt goods and zero rates supply would not be included.
However, this restriction will not apply where the managing director or any partner has paid more than Rs 1 lakh as income tax or the registered person has received a refund amount of more than Rs 1 lakh in the preceding fiscal year on account of unutilised input tax credit.
Abhishek Rastogi, partner at Khaitan and Co, said any restriction on credit utilisation may be subject to judicial review as the intention of GST was always seamless credit.
EY Tax Partner Abhishek Jain said, “The idea is to prevent misutilisation of credit by businesses taking fake credits,” Jain added.
Those claiming crores of rupees in fraudulent input tax credits will be in jeopardy as they will have to deposit one per cent, which may itself run into crores of rupees, he said.
Also, input tax credit up to only 5 per cent can be taken in case of missing invoices. Earlier, it was allowed for up to 20 per cent of the amount before it was restricted to 10 per cent with effect from January 1 this year.
Rastogi said the restriction of 10 per cent is already before courts for judicial review and this further restriction will certainly be the moot point of challenge as well.
Further, the CBIC has amended GST rules, restricting filing of outward supply details in the relevant form for businesses that have not paid tax for the past periods by filing summary input-output form.
Until now, non-filing of GSTR 3B resulted in blockage of e-way bill but will now result in GSTR 1 blockage as well. Jain said,“The government's idea here seems to be to curb input tax credit by businesses that have otherwise not paid their GST liability.”
AMRG & Associates senior partner Rajat Mohan said, “These changes indicate that the government is grappling with lower tax collections and high tax evasions, the burden of which will again be on honest taxpayers.”
The CBIC has also notified authentication of Aadhaar number or physical verification of business premises for the purposes of obtaining GST registration.
“This amendment has been introduced to prevent fraudulent registrations,” Jain added.
Also, the validity of e-way bill provisions has been amended by the CBIC. Now, the bill will be valid for one day for every 200 km of travel against 100 km earlier.
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