Representation on 10 issues relating to GST

The All India Federation of Tax Practitioners has made a representation to the Finance Minister, CBIC Chairman, and GST Council on numerous GST problems. It presented 39 issues that require the government’s immediate attention in order to deliver a response.

Since its formation, the AIFTP’s Indirect Tax (GST) Representation Committee has made numerous suggestions on GST Law, many of which have been approved at various times.

Since the establishment of GST four years ago, the government has made major changes from time to time, but there is still much more that can be done to simplify the complex law and make compliance easier.

The following are a few critical concerns that the government should address immediately by releasing clarifications/circulars/notifications/amendments to the law in order to make doing business easier, improve compliance, and reduce litigation.

1. ITC claim restriction u/s 16(4):

The restriction on claiming ITC for a specific year until the due date of filing the September Return for the next Financial Year should be removed and such restriction should be linked to the date of filing the annual return for the concerned financial year, as certain unclaimed/short claimed ITC is only discovered while preparing/filing the annual return.

2. Denial of ITC to the recipient under Section 16(2)(c):

Section 16(2)(c) states that no registered person is entitled to an input tax credit in respect of a supply of goods or services, or both unless the tax charged on the supply has been paid to the government, either in cash or through the use of ITC. — three
Similar protections existed in state VAT laws as well, with courts ruling that ITC could not be denied to the buyer provided there was no collusion between the buyer and the seller.

It is the government’s responsibility to collect the tax from the supplier using its apparatus. The solution is for the buyer to remit a portion of the tax as TDS to the government, and for the authorities to be attentive in collecting tax from registered persons. Genuine buyers should not be penalized on this basis. Demanding tax from the buyer would be considered double taxation.

3. Adjustment of SGST, CGST, and IGST paid under incorrect heads:

The GST law states that if SGST or CGST was paid as IGST or vice versa unintentionally or otherwise, the registered person should demand a refund and make the payment under the right head again. Practically, it is not always practicable due to a variety of technical issues. There should be a process in place that allows registered persons to make changes to their returns on their own. Many lawsuits and harassment of registered persons will be avoided because of the flexibility, which will result in no revenue loss.

If such an error occurred, the commissioner had the authority, under VAT legislation, to make the necessary adjustments at the back end based on the taxpayer’s request.

As a result, we propose that a similar capability be made available to the proper official to transfer the tax from one head to the other, rather than requiring the taxpayer to pay again and claim a refund for tax paid under the incorrect head. This will help to relieve the strain of unneeded compliance and make doing business easier.

4. Implementation of ITC:

In many circumstances of ITC use, the taxpayer was required to pay CGST even if he had SGST credit available. Because GST is a one-nation-one-tax system, SGST might be set off against COST to make doing business easier and reduce the taxpayer’s working capital requirements, with no revenue loss.


5. Allowance of ITC not appearing in GSTR-2A due to an unintended error by the supplier in declaring the supplies as 1120 instead of B2B, and reporting of ITC from prior tax years in future returns:

The recipient does not obtain credit in the following cases, even though he meets all of the requirements for ITC u/s 16, and he suffers a total loss, despite the fact that the government has collected the tax due. As a result, it is suggested that a solution be found so that the recipient can attach necessary purchase documents as evidence when filing his GSTR-3B for which the credit has been claimed, and a separate row may be added to claim such credit on the basis that the proper officer can examine such documents attached before issuing any deficiency notice/inquiry to the taxpayer to verify the credit claim.

CBDT grants further relaxation in electronic filing of Income Tax Forms 15CA/15CB

Furthermore, if a taxpayer claims ITC for previous tax years in later returns as allowed by GST rules, there is no distinct row to demonstrate the same in GSTR-3B for the succeeding period and it must be recorded in 4A. (5). We believe that adding a new row on GSTR-3B to record earlier ITCs will be beneficial to both the taxpayer and the IRS during reconciliation.

For B2B transactions, certain taxpayers are currently required to issue e-invoices. The E-Invoice Portal does not allow for the correction of any errors that may have occurred during the process of producing such an invoice. A mistake in the buyer’s GSTIN on the invoice results in the buyer being denied an ITC.

6. TRAN-1 and TRAN-2 transitional credit:

Due to technological issues in the GSTN system, a lack of awareness of the new complex law, or some administrative mistakes claiming smaller amounts, transitional credit could not be applied in time in IRAN-1 or TRAN-2 in the case of a large number of taxpayers.

Many High Courts, including the Hon’ble Delhi High Court, have directed GST authorities to allow taxpayers to claim such credits, which are their vested right under Article 300A of the Constitution. However, the government has made retrospective changes to the law and has petitioned the Supreme Court to overturn such favorable orders.

It is suggested that, because the taxpayer has already paid tax on purchases under the previous law, denying credit for a procedural lapse would be a gross loss to him that would have to be borne out of his capital, and that the government should consider allowing the transition as a one-time measure through an amnesty scheme, as has been done in the case of filing old GSTR-3B returns for the tax periods from July 2017 to April 2018, as has been done in the case of filing old GSTR-3B

7. ITC on immovable property:

To reduce cascading effects and lower production/transaction costs, ITC on goods or services used in the construction of immovable property that will be used as a factory/commercial building or rented out for commercial purposes in the course of or furtherance of business should be allowed, with seamless credit being the very foundation of GST Law.

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8. ITC computation:

The formula for calculating ITC in Rules 42 and 43 is highly hard, giving the officers a stick to hit the dealers with because mistakes are certain to happen. “This law does not presume our merchants to be naturalists, geologists, or botanists,” the complete bench of the Honourable Kerala High Court stated. Similarly, no one expects taxpayers to be math professors or software experts. As a result, it is advised that simple procedures for calculating ITC be devised in order to simplify the business and reduce future lawsuits.
In the interim, the interest component of ITC reversal under Rules 42 and 43 should be eliminated. When the requirement for reversal arises solely as a result of a change in the ratio of taxable to non-taxable supplies, and there is no purpose to claim the incorrect ITC, paying interest is not rational or logical.

9. Allowing ITC in the Most Recent Amnesty Scheme:

In the most recent amnesty scheme, registered persons were allowed to file outstanding returns in GSTR-3B for the tax years July 2017 to April 2021 by August 31, 2021, by paying the tax due plus interest and a concessional late charge. Furthermore, due to limits in section 16(4) of the CGST Act, 2017, the registered person is unable to claim ITC under the system, resulting in double taxation.

As a result, we argue that he waived this constraint in the Amnesty Scheme in order to make it more relevant and effective.

10. Restrictions on the distribution of free samples due to input taxes:

Free sample distribution is required by corporate entities in order to encourage sales. Section 17(5)(h) of the CGST Act, 2017 places a restriction on input tax credit for free samples. Free sample distribution is essential in the course of business or for the advancement of business. As a result, we assert that the aforementioned

It is necessary to remove the restriction.