CA Saurabh Chokhra
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1. Credit Matching vs. credit reversal on 90 days unpaid invoice:

  • As per draft law (revised draft),input tax credit to receiver shall be available only when the supplier has paid the tax on supplies made to receiver and the same get matched (i.e. matching of output supplies with input supplies declared by supplier and buyer respectively).Once the credit get matched it will reflect in electronic credit ledger of buyer
  • However, the draft law also provides that in case of credit claimed in respect of input service then supplier to be paid within 90 days of invoice date otherwise the credit claimed to be reversed.
  • Here situation may arise where a person has claimed credit which got matched as well but subsequently liable to reverse the same in the event of failure to pay supplier within 90 days. But question arises that once credits got matched then why credit claimer to be unnecessary punished by asking for reversal on failure to male payment to supplier within 90 days because govt has already got its revenue from supplier. Now, it is matter purely between supplier and buyer that in how many days the invoice to be cleared.
  • Further, the reavailment made by buyer after payment of invoice may create a situation of credit mismatch.(as in case of reavailment supplier won’t be showing anything on its output side for this invoice).

2. Condition of receipt of services for claiming credit:

  • Inter alia conditions for claiming credit in respect of input service one such condition is that the registered taxable person claiming credit must have received the services.
  • Due to such condition,credit cannot be claimed on payments made in advance for services to be rendered in future which seems illogical.

3. Rent a cab service still non-creditable:

  • Like other services credit of rent a cab should also be allowed as long as it is being used for taking part in business meetings, meeting with business partners etc.

4. Treatment of deferred Cenvat of right to use radio frequency spectrum:

  • Transition provisions are silent regarding treatment of 2/3 rd deferred Cenvat lying in the books of telecoms.Further, in case of centralized reg. assessees such deferred cenvat should be permitted to be transferred to any of the registered taxable persons having the same PAN for which the centralized registration was obtained under the earlier law.
  • This will provide some relief to telecos who has already spent a lot in recently concluded auction in Oct 2016.

5. Transitional provisions for reclaim of reversed credit:

  • A window of 3 months has been provided to reclaim by paying off the invoices of the reversed credit under Rule 4(7) of the Cenvat Credit Rules,2004 . This time should be of at least 6 months.

6. Issue of supplementary invoices, debit or credit notes where priceis revised in pursuance of a contract:

  • As per draft law , the debit/credit notes issued against invoices raised in pre-gst period to be regarded as outward supply made under gst law which follows that tax on such debit/credit notes will be charged at the rate prescribed in gst law. Offcourse the gst rate is likely to be at least 3% higher than that of in previous law.
  • This will result in unplanned cash outflow. Therefore, the debtit /credit notes should be chargeable to pre-gst rate.

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