Recently, the Central Board of Indirect Taxes and Customs (CBIC) issued guidelines on blocking tax credits by field officers of the Goods and Services Tax, stating that such barriers are not based on "material evidence". It should be based, on the basis, and not just on ‘doubt’.
(Moratorium Related CBIC Guidelines On Input Tax Credit)
Input tax credit
It refers to taxes that are paid by the business at the time of purchase and can be used to reduce its tax liability when it sells.
This means that the tax already paid on the input can be deducted and the remaining amount is paid while paying the tax on the output.
Exception: Businesses covered under 'Composition Scheme' cannot get input tax credit. Input tax credit cannot be claimed for personal use or even for exempted goods.
The ‘Composition Scheme’ is a scheme under the Goods and Services Tax, which can be chosen to get rid of complex formalities. Whose turnover is Rs. Any taxpayer with less than Rs 1.5 crore can opt for it.
Provisions for claiming ‘input tax credit’
The revised Rule 36 (4) of the CGST (Central GST) Rules, 2017 provides that input tax credit can be obtained only when the supplier of goods updates and uploads the details of supply online through each bill.
New Guidelines
- It prescribes certain circumstances in which such ITC may be blocked by a senior tax officer.
- This includes obtaining credit without any invoice or any valid document or obtaining credit on invoice by buyers on which GST has not been paid by the sellers.
- The Commissioner or any officer authorized by him, not below the rank of Assistant Commissioner, should decide to block ITC at his discretion considering all the facts of the case.
- Although the government introduced Rule 86A in the GST rules in December 2019, which provided for blocking ITCs available in taxpayers' electronic credit ledgers, the authorities had strong reasons to believe that ITCs were being exploited fraudulently.
- Judgment shall be based on the physical evidence available or collected in respect of fraudulent input tax credit in accordance with the conditions under sub-rule (1) of 86A.
- The guidelines recommend financial limits for the division of powers between the commission, the joint commissioners and the assistant commissioners on blocking the tax credit.
- Deputy or Assistant Commissioner Rs. 1 crore to ITC, Rs. More than Rs 1 crore but Rs. Less than 5 crore and Principal Commissioner or Rs. Can block more than 5 crore commissioners.
- If an officer blocks ITC under due process, the taxpayer will be informed about the action taken on the GST portal and with the details of the officer blocking it.
Back to basics: Central Board of Indirect Taxes and Customs (CBIC)
It is a part of the revenue department under the Ministry of Finance.
Following the introduction of GST, the Central Board of Excise and Customs (CBEC) was renamed Central Board of Indirect Taxes and Customs (CBIC) in the year 2018.
It is involved in formulating policy regarding collection and recovery of Customs, Central Excise, Central GST (CGST) and Integrated GST (IGST).
GST Act includes- (i) Central Goods and Services Tax Act, 2017 (ii) State Goods and Services Tax Act, 2017 (iii) Union Territories Goods and Services Tax Act, 2017 (iv) Integrated Goods and Services Tax Act , 2017 (v) Goods and Services Tax (Compensation to States) Act, 2017.
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