Mumbai – Several Indian companies including the companies that have large market capitalization may start receiving notices very soon. What are these notices about? So, from Monday onwards the companies will start receiving a notice regarding the transitional tax credit.
This follows from indirect-tax department after the Central Board of Excise and Customs (CBEC) asked all the chief commissioners to verify all the transitional credit claims beyond ₹ 1 crore. So this brings approximately 160 companies into the surveillance. These companies have claimed as much as ₹ 65,000 crores in transitional tax credits.
By last Friday, the chief commissioners had received the names of all the companies in their jurisdictions. Notices are expected to be issued to the companies, and these would be asked various explanations regarding the claims that they have raised. In some cases, it is also expected that few Hyderabad based infrastructure companies might be asked to reproduce their Value added tax (VAT) for the past one year.
There is a suspicion that many companies have tried to claim credit even when they do not have proper invoices to support these. In an ideal case scenario, the companies cannot claim 60% of the transitional credit but companies seemed to have gone ahead and claimed as much as 100% credits, an official confirmed. This entire move by the government has caused an uproar among the companies.
MS Mani, who is a partner at Deloitte India, was of the opinion that the large companies that have very high inventories and long cycle time might rightfully have claimed significant high transition credit that is due to them. Hence, according to him, it is a good idea to evaluate all these companies after taking into consideration the size of operations and attendant circumstances. He also added that there was a dire need to define the entire processes on which transition credits would be scrutinized.
A tax official confirmed that the individual companies that are under the lens or are mostly being scrutinized are major vendors of some of the biggest Indian companies. In most of the cases, the government is planning to let the companies rectify their mistakes. Industry experts are also of the opinion that ₹ 65,000 crores out of revenue of ₹ 95,000 crores looks a bit disappropriate in the first look. In many cases, it looks as if the companies have made genuine errors to the credits and these might be revised in the coming future.
This might be a premature activity since the last date to file the returns was extended to October 3 for TRAN-1. The final data and the final errors would only be known then, said Mr. Sachin Menon, the national head of Indirect tax at KPMG.