Is GST about to hurt genuine businesses - well it seems like

The Govt is implementing new restrictions in availing input tax credits.

So far, businesses have been claiming input tax credit based on their own invoices. For instance businesss ‘A’ would claim credit for Rs 100 based on its own accounts even though its vendor ‘B’ has uploaded invoices for supply worth Rs 80 only. This would get reconciled at the annual return filing stage – here too businesses were required to disclose only the unmatched credit amount; their ability to avail full credit based on their own accounts wasn’t restricted.

That freedom has now been curtailed.

The amended rules say that input tax credit on unreported invoices should not exceed 20 percent of credit on eligible invoices.

The math is incredibly complex, this is how it would work.

Assume ‘A’ has purchased inputs with Rs 1,000 in GST paid, that is ‘A’ has Rs 1,000 in input tax credit on its books. Its vendor ‘B’ has uploaded invoices with GST payments of only Rs 700, and Rs 300 worth are unreported invoices. To reiterate, so far, ‘A’ could’ve claimed the full Rs 1,000 as input tax credit and offset it against GST to be paid on the output. But now only 20 percent of eligible credit i.e. Rs 700 can be claimed on the unreported invoices. In this example, ‘A’ would only be able to claim Rs 840 as credit (Rs 700 + Rs 140).

So far, reconciliation of invoices between buyers and their suppliers was an annual exercise—now it would need to be done on a monthly basis. Small businesses startups MSMEs even big traders aren’t geared for this level of compliance—in which case they would be able to claim much lower input tax credit, hence have to pay more tax, resulting in cash-flow constraints and lost business.

LocalCircles kindly take up this matter. If my understanding is misplaced someone correct me. This will lead to more cash flow issues for businesses and can even break many small businesses. more  

I do not understand how same invoice can be uploaded by buyer and seller. And you should understand that govt has allowed 20% of unmatched invoice. Which may be correct or wrong. Do you consider Giving 100% credit on disputable invoice prudent decision by Govt. more  
In our small business we have no difficulty in this, because we keep checking with our vendors about their uploading of the invoice.

Yes, dishonest people always make life difficult for honest people.

But in my vendor interactions, I find a new generation of businessmen coming up, who don't want to continue the dishonest practises of their fathers. So once the rate of cheating goes down the Govt will automatically make life easier for GST tax payers, as has happened in the case of Income Tax. more  
i am also facing becuase we dont get paid on time and Gst late penalty is very high by the time we adjust cash to pay penalty becomes double , i have paid more than 1.9 lakh as penalty alone since gst is implemented i just can not find my cash flow.... strugling more  
Government should in turn do all verifications before issue of GST no and harsh penalty to dishonest entities, we cannot do policing more  
It has been the dishonest business enterprises, who has now forced the Govt to change the rules for ITC. Relax, many more hard hitting ITC rules will come soon. more  
Post a Comment

Related Posts

    • 18% gst on CXO salaries

      Everyone please read attached. If you all agree, Let us request LocalCircles to take this up like they took up the matters of tax date extensions recently

      By Sridhar Mohan
    • Economy in Decline

      Look at these numbers. What is the plan to revive things? Rather what should be the plan? -- Mining sector contracts 8.5% -- Manufacturing sector contracts 3.9% -- Electricity secto...

      By Mukul Puri
    • MSME gst refunds not happening in 30 days

      On aug 23 the honble FM announced that pending msme gst refunds will get done in 30 days and going forward be settled in 60 days. The same is not happening. Can local circles please esca...

      By Vishal Khanna
    • ROC return filing date extension

      By law ROC returns have to be filed within 30 days of AGM. By law AGM has to happen within 6 months of financial year closing that is March 31. Given all the festive season etc, I think ...

      By Shirisha Kumar
    • People manipulating in name of startups

      Many many companies and smes are taking their old businesses and moving the business in new company after 2016 startup india. What is the Govt doing to ensure businesses of large compan...

      By Varun Bhawnani
    • State of the economy

      Good insights on what could be done to address the economy but given the collection challenges of gst and direct tax how can the govt boost rural give away.

      By Sudesh Rai
    • GST

      20% of tax GST tax payers account for 80% of tax . the GST filing should be simplified to a large extent. I am also a registered GST member without appreciable turn over. The gst form can not be u...

      By Subramanian Venkataraman
    • Banks shut on 11 days this month

      How do we as a country call ourselves open for business when our banks are closed 1/3rd of the time. 2 October Gandhi Jayanti 6 October Sunday 7 October Navami 8 October ...

      By Sudesh Rai
    • Duty Cuts on Chinese Imports - 80% items

      I read the headline India may cut duties on 80% chinese imports. At a time when the entire domestic industry is under tremendous slowdown there cant be a policy that allows India to get ...

      By Rohit Jain
    • China Sellers on ecommerce

      This is how they sell. Selling by live streaming on 40 different sites at the same time. Where is the Indian ecommerce seller - probably in some Govt office dealing with an inspector and making him...

      By Sujata Singh
Share To
Enter your email & mobile number and we will send you the instructions

Note - The email can sometime gets delivered to the spam folder, so the instruction will be send to your mobile as well

Please select a Circle that you want people to invite to.
Invite to
(Maximum 500 email ids allowed.)