NEW DELHI: The recently introduced GST rule insisting that tax refund claims by businesses must be supported by invoices from suppliers to avail full credit is making life more difficult for businesses, especially small ones, who don’t have the influence to force suppliers to comply with timely filings.
The companies point out that there is no penalty on suppliers who delay filings. This, the affected firms say, would result in their working capital getting blocked as the government would release only 20% of their refund claim if the invoices are not duly uploaded by the supplier.
To add to the confusion, small suppliers whose turnover is below Rs 1.5 crore are not required to file invoice details on a monthly basis. They can do so every quarter.
“The earlier proposal was to have monthly returns for all, data of which was to be auto-populated for annual returns, making the process simple. However, with concessions on filing time, the absence of monthly returns may well cause problems all around,” said Sumit Dutt Majumder, former chairman of the Central Board of Excise and Customs.
Earlier this month, the government had capped the input tax credit that registered businesses can claim under GST to 20 per cent, unless the entire eligible amount is backed by relevant invoices or debit notes filed by their suppliers.
“The fact that there is no penalty on suppliers – even suppliers who have a turnover of more than Rs 1.5 crore makes it tough for firms who could suddenly fund their claims unsupported by filings by their suppliers,” pointed out Swapan Sarkar, president, Indo-American Chamber of Commerce.
“The worst-case scenario for businesses claiming refund is that if a supplier does not file his invoice within 180 days, then the entire amount has to be reversed and taxes have to be paid all over again,” he added.