Input Tax Credit under GST: Practical Issues



GST system now became the part of our day to day finance function since last 5 months, there are various issues faced by the Government, dealers and all stakeholders under this system. Apart from the various issues like rate change, website problem, return issues etc. one more major problem which we are facing the GST input Tax credit issues.

Under previous indirect tax system there is no real-time integration between input tax claim under GST by the purchaser and the relevant output tax shown and paid by the seller in their returns, incase seller not paid the tax to government or not filed the return we unable to check the same so many cases we came to know only during assessment with the department and finally the department will raise the demand notice to the purchaser even default by the seller. This is the common problem in either CENVAT or Local VAT system. But under current GST system the input problem real-time integration has been shorted out, now we can able to check that whether our seller updating our input tax details or not. This will ensure the correctness of input tax credit claimed in the return. But the GST system will not reflect the completeness of your input tax credit claim under GST.

We should ensure the completeness of our input tax credit claim under GST with proper internal control and check system because it will involve financial impact in the company. This article discussing about some of the mandatory checklist we should maintain in our day to day system to ensure our input credit under GST.

1. GST number in Tax invoice: Basic requirement to claim the input tax credit is tax invoice from the supplier. Only registered dealer under GST can issue the tax invoice, but only tax invoice is cannot ensure completeness of your input tax credit, seller has to mention your GST number in that invoice, this will only ensure your input credit eligibility. So before processing any invoice we need to ensure the same.

2. Check the status of Supplier: Before placing the order or confirming the purchase, please check the status of supplier under GST, whether they registered as regular or composite scheme. The composite dealer cannot issue the tax invoice and recover from the buyer.

3. Know about applicable tax: During interstate transaction, please check and ensure the applicable tax such as SGST,CGST & IGST applicable. Generally, interstate transaction attracts IGST, but some of the transactions like immovable property attract only SGST and CGST even service receiver registered in the different state. So, check your eligibility of those input before finalizing such contracts.

4. Check the form GSTR-2A: GSTR 2A is an auto-populated form which gets created when the goods or service provider files for GSTR 1. As we know that through GSTR 1, the dealer or business provides the details of invoices raised by him towards the buyer, the buyer gets an intimation of the same in the form of GSTR 2A. Frequently check your Form GSTR-2A and reconcile with your inwards, incase any correction and amendment required we should immediately intimate to the seller and also incase seller not updated or uploaded your purchases, you can demand your seller to update the same and ensure your input.

5. Preparing input tax register: As we maintained input tax register to claim excise and service tax credit, we should maintain the separate register along with the input tax credit documents in hard copies will ensure completeness of our input tax credit claim.

6. Ensure the payment to supplier within prescribed time: Under GST, for claiming input tax credit, we should ensure the payment to the vendor within 180 days, if we failed to make the payment, we should reverse the relevant input credit along with applicable interest. So, we should keep the track that the payment for the vendor bills should not cross 180 days.

7. Proper check-in ERP systems: In case you are using ERP system to capture your input tax credits, you should carefully design the system from the Purchase order/Work order stage to till completion of the transaction such as HSN code, tax rate match and eligibility of taking that input etc. If it not captures or captured wrongly then it will affect the input tax credit.

The author can also be reached at consultattechno@gmail.com


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About the Author

General Manager

About Us: Techno Consultants is a consulting division of Techarbre Soluto Private Limited. Techno Consultants consist of a team of Qualified and Semi Qualified chartered Accountants and experts in the field of finance, taxation and accountancy. This division has been formed to provide the financial services with tra ... Read more

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