CBEC (Central Board of Excise and Customs) has ordered an investigation and scrutiny as out of the ₹ 95,000 crores collected as tax by the government in July, ₹ 65,000 crores have been claimed as transitional credit paid by the taxpayers. The CBEC has ordered an investigation on all the cases above ₹ 1 crore.
The goods and services tax (GST) was started on 1st July 2017, and it allows tax credit on the stocks that were purchased during the previous regime. This facility of the transitional credit is available for everyone only for the first six months since the implementation of this new indirect tax reform. The CBEC, which deals with the formulation and implementation of various tax regimes and policies concerning how the indirect tax is levied and how these are collected, has requested the GST tax officials to verify all the GST transitional credit claims that have been initiated for over ₹ 1 crore made by 162 entities.
CBEC member Mahender Singh had to say that the scope of claiming ineligible credit due to mistakes or confusion could be a possibility. Hence the CBEC had suggested that ITC (input tax credit) of more than ₹ 1 crore should be verified. The chief commissioners have been asked to send a report to the CBEC by 20th September on the input credit claims made by these 162 companies. To ensure that only eligible credit is carried forward, the CBEC has ordered the field offices to match the credit that has been claimed by the companies with the closing balance of the returns filed in the previous law.
To ensure that only eligible credit is carried forward, the CBEC has ordered the field offices to match the credit that has been claimed by the companies with the closing balance of the returns filed in the previous law. Also, it would have to be checked if the credit that has been filed by the companies who were eligible under the GST.
Till the last week, approximately 70% of the taxpayers had filed for returns for the month of July, which amounted to a high revenue of ₹ 95,000 crores under the GST reform. However, as much as ₹ 65,000 crores have been claimed by the companies as the transitional credit in TRAN-1. The government came out with the feature of TRAN-1 for businesses so that they could claim the credit for the taxes that were paid on the transition stock and the traders and retailers were given 90 days to file a claim. In addition to this, the businesses have also been allowed to revise the form till October 31st, 2017.
Pratik Jain, who is the partner and leader at PwC said that the Rs 65,000 crore amount looked very high at first glance as a lot of large companies were yet to file the TRAN-1.
As per the government rules, the traders and retailers have been allowed to claim as much as 60% of the taxes that have been paid earlier against the SGST and CGST wherever the tax rates exceed 18%. In scenarios where the tax rate was below 18%, only 40% credit will be eligible to be claimed as SGST and CGST.
The government also confirmed that it would also refund 100% excise duty on the goods that cost more than ₹ 25,000. However, to avail this facility, the manufacturer would be required to issue a credit transfer document (CTD) to the dealer as proof that the excise has been paid on the goods before the GST had been implemented.
The dealer who is availing the credit would be required to maintain all the invoices related to buying and selling of the goods from the manufacturer.
If the entire ₹ 65,000 crores of transitional credit are found to be genuine, then it would burn a deep hole in the revenue collections of the government. Apart from the transitional credit, the taxpayers are also expected to claim the input tax credit, which is only going to add to the misery.
A list of all the assesses who have claimed the transitional tax credit showed that a firm from Delhi had claimed as much as ₹ 228.2 crores as the transitional credit. The carry forward credit is only eligible or permitted when such credit is permissible under the goods and services tax.
The experts have also suggested that the traders should themselves review their claims and make amendments before the government starts to probe and take subsequent actions.