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We are in a State of War with Govt on ITC Mismatch Issue?

Here we all professionals and Traders are one side and Govt is at Another side? with Zero Communication between Each Other? Neither Govt wants to handle Recovery from Defaulting Suppliers Nor Recipient can force supplier to pay GST to Govt on Time without Delay. So Problem is Drastic and will affect all the stakeholders.

Route Cause of Mismatch

So I have tried to solve this issue with a Different View which if done then 99% problems of ITC Mismatch will be solved with Efforts. Lets understand Route Cause of the problem first, I think problem is not timely filing of Returns while Suppliers but Problem is that Suppliers utilize Govt Fund (GST) in their Businesses hence they are unable to pay the Taxes on time and then try to deffer their Liability till Fund Availability. And they Even not file GSTR-1 to Avoid mismatch in GSTR-3B and GSTR-1. They First try to arrange funds to pay the taxes then show Sales in the month in which they are willing to pay the taxes. So now think whether GST Received from recipient was their working capital which they had utilized in their Business? Obviously No. But still we can not expect from All Suppliers to Not to use Govt Funds in their Businesses.

Solution to GSTR-2B and Mismatch Problem of GST ITC

Solution of Route Cause of Mismatch

Now We have identified the Major Issue so come to the Solution. Is Solution with Supplier. I think No. Because Supplier can resolve this problem only if He manages his Funds Separate for Businesses and GST, which is again a discipline Issue. So Now go to the Recipient, he is suffering even after making payment of GST to Supplier. He is thinking why I had made payment of GST to Supplier while It was belonging to Govt. Answer comes Govt mandated to make payment of GST also supplier then supplier will pay to Govt. Here is the Problem in Law. Why Govt revenue is not directly being paid to Govt ? Govt is allowing supplier to use its money as working capital. So Solution is Simple that Govt should make All B2B Supply Taxable in RCM Basis. Sothat Payment will be done to Supplier to Value of Supply and GST Directly to the Govt. Let me explain the same with an Easy Example. Suppose Buyer purchase Goods of Rs. 100/- from Seller and Rs. 18/- is GST Liability on Seller. But if Govt Notifies then Buyer will Pay Rs. 100/- to Seller and Rs. 18/- Directly to the Govt and take ITC of Rs. 18/- based on Challan Deposited in RCM. Impact will be as under :

1. Supplier will not be able to use Govt Funds (GST) and Govt will get timely Revenue.

2. Recipient will be eligible for ITC based on his Challan so not causing any problem of Mismatch.

3. Only Taxes of B2C Supplies should be paid by Seller to Govt Directly.

4. Sale-Purchase matching can be done easy based on GSTIN. Mismatch may remain but GST Amount will not be involved.

5. Fake ITC Bills will not be there due to Challan Payment Basis

Here, Some People may mis-understand that I am Suggesting change of Tax Incidence. But No I’m telling for RCM on B2B Sales. Tax Still will be collected based on Supply Transactions.


Author Bio

Myself is CA Sachin Jain. I am qualified CA, CS and DISA (ICAI). I have experience of more than 10 Years of Industry and CA Practice. Presently practicing in the Field of GST, Income Tax, Finance and Audits in Indore and Bombay. I have specialization in Quasi CFO Service and Automobile and Real Esta View Full Profile

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  1. CA Sachin Jain says:

    There is No Impact on Funds as recipients will pay to Government Directly Instead of making GST Payment to supplier. Only Direct Payment is being done. Thanks.
    CA. Sachin Jain 08989-90-4652.

  2. Ajay Shirke says:

    There would be huge impact in cash flow which is not possible for most of the firms if all B2B payment covered under RCM rater than payment should be made for Ineligible Input only.

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July 2024