1. Interest for not making Payment to Supplier

The recipient of supplies, needs to make payment for supply along with GST before 180 days from the date of Invoice, other-wise, the GST (of which he had availed credit) shall be added in the output tax liability of the recipient.

Not only the output tax liability, but Interest is required to be paid for violation of above 180 days limit. The harsh of interest is unjustified, since the supplier is anyways required to deposit the tax in government treasury and ITC is further matched.

2. Credit distribution in same month

Input Service Distributor has to distribute credit in the same month. The most delusional provision that can be found in the whole GST Law.

3. Matching of claim by Switching Tax payers

Credit claimed by switching tax payers from exempt/ composition scheme to normal, shall be matched as well. The powers of matching are entailed only under Section 42 and 43 of GST Act, giving matching power to Central Government, is an adhesive abuse of power in the garb of delegated legislation.

4. Reversal of ITC – method

Reversal on account of Exempt and Non business use is only permissible by following proportionate method.

5. Invoice Level Identification of Inputs

Input tax credit needs to be identified Invoice wise with respect to Inputs/ inputs services used (1) Exclusively Non business use (2) Exclusively Exempt Supplies (3) Negative List items and (4) Exclusive for making Taxable Supply. This will eventually prompt One Invoice One Item policy.

6. FIFO method of ITC utilization

While Section 17 (1) and (2) of GST Act uses the words “restricts” for credit towards non-taxable supplies and exempt supplies, the rules uses the words “allowance and then add to the output tax liability”

The addition to the output tax liability is used at many places in the GST Law. This methodology fulfils the uncanny motive of the government by enacting the FIFO method of credit utilization.

7. Petroleum Products Ex Excise Duty and Sales Tax

Petroleum products are liable for Excise duty and Sales Tax, and will be out of the GST purview. The turnover of these goods shall be on Ex – Excise Duty and Ex – Sales Tax for counting the exempt and aggregate turnover for the purpose of ITC reversal.

8. Credit Reversal qua Capital Goods

Credit reversal qua Capital Goods is very complicated. A sum called “Tm” needs to be computed separate for every month and has to be carried and spread between exempt and non-taxable proportions for 60 months from the computation.

9. Interest on ITC reversal on Capital Goods

Another deceiving provision under Rule is “applicable interest”, against reversal of ITC towards Capital Goods used for exempt/ non-taxable purpose. This applicable interest is incomputable, delusionary and shambolic provision.

10. Job work Challan – Time bar of section 16 (4)

Job work challan (issued at the time of removal of goods for job work), shall be deemed to the Invoice just in case goods are not returned back to principal supplier within the specified period of 1/ 3 year(s).

This provision in isolation could make Input tax credit a potential cost for the principal supplier by virtue of time bar of taking credit, mercifully however Rule 2 (4) has been introduced to provide that, such time bar of taking credit will not be applicable for re-availing of credits. However 2 (4) contains an ambiguity of “re-availing of credit”, while in the first place the methodology of credit denial is that of “addition to output tax liability”.

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November 2020