GST New Rule – Negative Cash Flow for Exhibition Stall Fabricators?
GST: New Rule – Negative Cash Flow for Exhibition Stall Fabricators?
The GST notification states that after suspension of registration, businesses would be allowed to make taxable supplies, but not charge tax on supplies or issue a tax invoice.
In a major overhaul of how input credit is availed by Exhibition Stall Fabricators and other businesses, the Government has proposed that incase where there is a mismatch or details have not been uploaded by the suppliers, input tax claim will not exceed 20 percent of the eligible credit available in respect of invoices or debit notes uploaded by the suppliers. This is expected to have a significant impact on the cash flow of firms.
As per the amended CGST Rules (likely to become effective in days to come), input tax credit to be availed by a registered person, the details of which have not been uploaded by the suppliers, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes uploaded by the suppliers. This means going forward, it will be mandatory for the buyers to match the ITC claimed with the details uploaded by the vendorsPritam Mahure, Chartered Accountant
For example, say in the month of April, the input tax credit available (as per books) is Rs 1,500. Out of this, certain vendors wherein input tax credit involved is say Rs 500 have not filed their GSTR-1. Now, due to amendment, the buyer can avail ITC only to the extent of Rs 1,200 (i.e. 120% of R 1,000) and not 1,500
This restriction will actually mean that the Companies need to monitor whether the suppliers are uploading their returns on regular basis. Most Companies are likely to feel the pinch of the amendment (once it becomes effective)Pritam Mahure, Chartered Accountant
Given there is no matching of invoices taking place, taxpayers have been filing GSTR 3B. Subsequently, GSTR 2A as a return was automatically generated for a taxpayer from his seller’s GSTR-1. Any difference could be settled at a later date and there was no impact on what a taxpayer could claim as ITC in case there was mismatch. That is likely to change.
The amendment has introduced another set of compliance on a monthly basis i.e. check GSTR 2A if the credit claimed doesn’t exceed GSTR 2A by 20% and also determine the credit which are ‘eligible’ out of the GSTR 2A before applying this 20% rulePwC, Partner, Priyajit Ghosh
- This restriction will actually mean that the Companies need to monitor whether the suppliers are uploading their returns on a regular basis.
- Most companies are likely to feel the pinch of the amendment (once it becomes effective).
- The amendment has introduced another set of compliance on a monthly basis.
Prior to this notification, irrespective of the credit as reflected in GSTR 2A, credit was being claimed by the purchaser without any restriction, subject to fulfilment of other conditions. Now this credit has been restrictedHarpreet Singh, Partner, in KPMG India
Additionally, the notification states that after suspension of registration, Exhibition Stall Fabricators and other businesses would be allowed to make taxable supplies, but not charge tax on supplies or issue a tax invoice. More importantly, GSTR-3B is to be treated as Return under Section 39 and hence, credit would need to be availed by 30 September of the following financial year.
The retrospective amendment of GSTR 3B being treated as a return under Section 39 would open a Pandora’s box for businesses who were planning to avail credits for FY 17-18 till the filing of annual return. Separately, with another ten days remaining for filing of GSTR-3B for the month of September 2019, companies would now on priority need to execute reconciliations for FY 18-19 to avail missed credits, if any.Abhishek Jain, Tax Partner, EY India
Jain adds that companies would now also need to execute an additional compliance of executing monthly reconciliation of credits vis-a-vis GSTR 2A; to ensure availment of unmatched credits only upto 20 percent of eligible credits reflecting in GSTR-2A. “The above new prescriptions may entail additional compliances for businesses; where these amendments (including retrospective amendment) are upheld by judicial forums,” said Jain.
A proper reconciliation of GSTR- 2A with books will now be critical to claim ITC. As businesses will strive to reduce instances of non upload of invoices by sellers. They will have to reduce ineligible credit instances to within 20% of eligible credit.Archit Gupta, Founder and CEO, ClearTax.