Need sellers’ undertaking for ITC reversal

“The new system allows suppliers to obtain certificates from CAs or CWAs confirming this reversal for discounts exceeding Rs 5 lakh.
For representative purposes only
For representative purposes only(Express Illustrations)

NEW DELHI: Suppliers of goods and services will have to give undertakings signed by Chartered Accountants (CA) or Cost Accountants (CWA) that they will reverse any ITC claimed on discounted supplies.

The clarification was part of 16 circulars issued on Thursday by the Central Board of Indirect Taxes and Customs (CBIC), following the 53rd GST Council Meeting last Saturday. The Council has recommended a mechanism for suppliers to demonstrate compliance with GST rules related to post-sale discounts. However, till the time such a mechanism is developed an undertaking signed by CAs or CWAs would suffice.

“The new system allows suppliers to obtain certificates from CAs or CWAs confirming this reversal for discounts exceeding Rs 5 lakh. For smaller discounts (up to Rs 5 lakh), a simple undertaking from the customer suffices,” explains Saurabh Agarwal, Tax Partner, EY.

Another circular has clarified that insurance companies are now eligible to claim ITC on motor vehicle repair expenses incurred through reimbursement claims, provided that the necessary documentation is correctly issued.

The GST authorities have also said that telecom operators are now required to pay GST on spectrum based on their payment schedule. If a telecom operator makes a full upfront payment, GST will be due when the payment is made or when it is scheduled to be made, whichever comes first.

“The clarification will put at rest the potential untimely demand for GST especially for cases where the telecom operator has opted for deferred payment option,” said Harsh Shah, Partner at Economic Laws Practice.

If a telecom operator makes a full upfront payment, goods and services tax will be due when the payment is made or when it is scheduled to be made, whichever comes first, as stated by CBIC.

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