Days after the Goods and Services Tax (GST) Council announced key decisions, accounting firm PwC said a rule cleared by the indirect tax body shows the Union government’s intent to limit input tax credits to businesses. On Friday, the GST Council gave a green signal to changes in rules concerning input tax credits.
At its 45th meeting, the GST Council announced that the rule would be aligned with a new legal provision introduced in the CGST Act by way of Finance Act 2021. The amendment will be brought into effect after the Finance Act 2021 is notified, it said.
The amendment allows a business to secure tax credits only if it provides the details of taxes collected by the vendor in its sales return. The tax details should also be communicated to the buyer.
This change is being implemented in phases by the government due to pressure from the industry and traders, said the accounting firm.
According to PwC, which analysed the GST Council’s decisions, the government has, since October 2019, reduced tax credits available to businesses if vendors don't upload details. The tax credit available to businesses, which was capped at 20 percent in October 2019, is restricted at five percent now.
In another major amendment brought about recently by the Goods and Services Tax Network (GSTN), a registered person will not be allowed to furnish the details of outward supplies of goods or services or both in Form GSTR-1 if he has not furnished the return in Form GSTR-3B for the preceding two months. The rule came into effect on September 1, 2021.
First Published: IST