Goods & Services Tax (GST) in IndiaDeadly Provisions Of The Draft Goods & Service Tax (GST)Act,2016 -I

Deadly Provisions Of The  Draft Goods & Service Tax (GST )Act,2016 – I

We are sharing various deadly provisions of the draft GST Act ,2016 under a series of article i.e Deadly Provisions Of The  Draft Goods & Service Tax (GST )Act,2016 .

In the first series, we are covering the aspects related to Input Tax Credit as below :

1. Onus on Receiver For Credit of Input Tax Credit (ITC)

The onus has been cast on the buyer, under Section 16 of  draft GST Act,2016 to ensure that the supplier has paid goods and service tax (GST).

A buyer will not be entitled to claim an input tax credit (ITC) unless the tax charged in respect of such a supply has been paid by the supplier.

The buyers shall be dependent on the supplier for documentary evidences to sustain the actual payment at the supplier’s  end otherwise , the ITC shall not be availed and it will be in doldrums at the end of the buyer .

Sub-Section(11) of Section 16

(11) Notwithstanding anything contained in this section, but subject to the provisions of section 28, no registered taxable person shall be entitled to the credit of any input tax in respect of any supply of goods and/or services to him unless

 (a) he is in possession of a tax invoice, debit note, supplementary invoice or such other taxpaying document as may be prescribed, issued by a supplier registered under this Act or the IGST Act;

(b) he has received the goods and/or services;

(c) the tax charged in respect of such supply has been actually paid to the credit of the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 27:

 Provided that where the goods against an invoice are received in lots or instalments, the registered taxable person shall be entitled to the credit upon receipt of the last lot or instalment.

It shall lead to a practical difficulty at the end of the buyers . Unfortunately, it puts a brake on the widley claimed seamless ITC flow under the GST regime  in India  .

2.One Year Restriction for Availment of Credit Continues

It is pertinent to note that the restriction of one year to avail credit i.e ITC is also proposed to exist in GST regime. 

Sub-Section 3(A) of Section 16

 (3A) A taxable person shall not be entitled to take input tax credit under sub-section (2), (2A) or sub-section (3)in respect of any supply of goods and / or services to him after the expiry of one year from the date of issue of tax invoice relating to such supply.

3.Restriction of Utilisation of ITC Via Returns

Above all, the proviso to Section 28 again restricts the utilisation of ITC to a person who has not filed a valid return under Section 27 and till the time the self assessed tax liability is discharged as well.

28. Claim of input tax credit and provisional acceptance thereof

Every taxable person shall, subject to such conditions and restrictions as may be prescribed in this behalf, be entitled to take credit of input tax, as self-assessed, in his return and such amount shall be credited, on a provisional basis, to his electronic credit ledger to be maintained in the manner as may be prescribed:

Provided that a taxable person who has not furnished a valid return under section 27 of the Act shall not be allowed to utilize such credit till he discharges his self-assessed tax liability.

We shall be covering entire provisions of the draft GST ACT,2016 on regular basis on amlegals.com. Please keep visiting amlegals.com. For further enquiries, you may please connect on info@amlegals.com

by Anandaday Misshra,Advocate 

He is an eminent  High Court advocate with expertise in GST model of different countries.He practices in Indirect Taxes, Corporate laws, Arbitration, IPR, Contract laws etc,.He can be contacted on anand@amlegals.com 

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