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

    • Covid 19 job Crisis in India

      Has been captured well by this graphic attached. I want to know what are entrepreneurs doing in this circle. Are you letting some staff go or are you cutting salaries? Our small 7 store retail chai...

      By Naina Mittal
      /
    • Difference in Intent and Ground scenario for Loans for MSMEs

      Hon. FM has said that Banks will give easy and more loans to small businesses (MSMEs), so that they use the funds to tide through these difficult times and then repay the same with interest over a ...

      By Gautam Poddar
      /
    • Minimum Balance charges

      On one hand government is providing many reliefs for common man, one of them being that Banks will not charge interest / EMIs for 3 months, on the other hand Banks are charging huge amounts in cas...

      By Gautam Poddar
      /
    • Workplace Social Distancing guidelines/rules

      As issued by the Government, attached

      By Anil Mehta
      /
    • By Vishal Khanna
      /
    • No Labour Laws applicable for 3 years

      it has exempted industries in the state from ALL LABOUR LAWS for the next 3 years. Attached Notification. Big relief for industry. All states should do this Only these labour laws will a...

      By Ajay Dutta
      /
    • Starting up of MSME units - not really

      My brother has a MSME unit in Noida Phase 2. He resides in Delhi. 80% of their staff lives in Delhi. None of them are being permitted to enter Noida because of border restrictions. This is ridiculo...

      By Vishal Khanna
      /
    • Labour Crisis

      Most migrants workers are back to home town and most probably Will not come back till post Diwali or Chhath Puja. Industries are Being opened but how these industries wil operate? there...

      By Anil Mehta
      /
    • By Nikhil Jain
      /
    • Govt cuts salaries; Private sector cuts will be brutal

      Govt has frozen the dearness allowance to central government employees till July 2021 along with any kind of arrears (attached). With this even private sector will cut the salaries, no work no pay ...

      By Anil Mehta
      /
    • Startup in the right field

      2020 will vastly accelerate adoption of the following. If you are a startup, pivot to these areas or become enabler of these 1 e-commerce 2 drone delivery 3 digital contactless...

      By Rohit Jain
      /
Share
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.)