38th GST Council Meeting Brings More Restrictions on Input Tax Credit

In this meeting of GST Council, it has been declared that the input tax claim will not exceed 10% of the available credit limit (Central Tax Notification). Earlier this limit used to be 20% of the available input tax credit limit.

The GST Council has made changes in the rate of input tax credit restriction limits. The input tax credit is restricted to be withdrawn when the details furnished by the supplier does not match that furnished by the dealer or the manufacturer.

Under the following circumstances input tax credits are restricted:

If the supplier is unregistered.
If the supplier has chosen composition scheme.
If the goods are not purchased with invoice.
If the invoice is not having the details of the amount of tax.
If the goods purchased are in the exempted category other than exports.
If the goods are purchased for personal consumption.
In case of interstate good purchases.
In case of motor vehicles and conveyances.

Read Also: ITC Effect of GSTR 1 Return Subject to 10% ITC for Purchase

Reduction in the limit may effect available input tax credit will be reducing the flow of working capital for the businesses. This will put additional burden on businesses which are already suffering with unmatched credits. This move has been aimed at enforcing a better discipline in tax payment, reporting and credit ecosystem.

The credit limit should not exceed by 10% of the GSTR 2A invoice. The businesses will be hit by a serious cash flow issue if they are not able to counter the invoicing issue properly as it will restrict the cash flow that are made due to input tax credit. So, it becomes increasingly important to ensure that the invoicing is done properly during the sale/ purchase of goods and services.

The Form GSTR 2A also needs to be checked every time input tax credit is to be withdrawn.
It was only in October this year that the Government has come up with Input tax credit rule and now there is another change in this meeting that has come up with the reduction in the rate of restriction of the GST that has been suggested.

These frequent changes are very unsettling for the businesses especially the small traders and business people who have to spend for maintaining the compliance. Keeping a watch on the regulations every month or so, is tedious for them and is posing a restriction in making them compliant and effective. The Government needs to make a fixed framework for devising changes in the GST Act and should follow a timeframe to make changes to the Act. Every now and then coming up with some new reforms make the already complicated GST even more complicated and difficult to comply with.

Comments

GST: Assessees Must E-file Their Tax Returns by 30th Nov 2024 to Claim Pending ITC

If you are a GST-registered assessee you need to consider the due date to avail of any due Input tax credit or revised errors/omissions for the FY 2023-24 is November 30, 2024, via submitting the appropriate GST forms. Missing the due date can produce an outcome of a financial loss as the unclaimed ITC could not be used to offset your output tax obligation. What is the Method to Claim the Due ITC or Revised GST Errors for the FY 2023-24 It was stressed by the tax experts that the GST law specifies the procedure to claim the due ITC via GSTR-3B and amend errors in GSTR-1. Filing GSTR-1: Errors induced in GSTR-1 can be rectified by making amendments in the following GSTR-1 filings. Filing GSTR-3B: Via the GSTR-3B return the obligated ITC can merely be claimed. November 11, 2024, was the due date to submit the GSTR-1, and November 20, 2024, is for GSTR-3B without any penalty. Both the outcomes can be provided till November 30, 2024, as per the late fees. R...

How ITR Software Assists Individuals in Filing Tax Returns

Every assessee's process of income tax return (ITR) filing is significant, as it contributes to Indian's economy. The Income Tax Department has made efforts to facilitate this approach in recent years, but numerous people still see themselves steering a difficult financial system, multiple tax deductions, miscellaneous exemptions, and changing tax laws. This complexity can turn what must be an easy task into a significant challenge. In this context, income tax software evolves into an important partner, presenting a useful variety of accuracy, efficiency, and reassurance. The software enables return filing that permits taxpayers to handle their financial responsibilities when complying with the law. 1. Accurate Tax Calculations An incorrect income tax calculation of taxes could result in messages from the Income Tax Department or missed refunds. The tax software helps in finding taxable income and tax deductions that you may be allowed, like insurance or home loans. The co...

Why Small Firms Should Consider Gen Payroll Software?

Businesses in this competitive era would be required to manage the payroll. Payroll software has multiple operations such as paying employees, following tax laws, managing employee benefits, filing important documents, and keeping accurate records. Businesses that manage tasks manually or with spreadsheets can result in inappropriate compliance and issues, wasting time in doing operations. Gen Payroll software arrives to manage payroll with accuracy and resolve the issues that come therein. The merits and demerits of Gen Payroll software are mentioned below. Gen Payroll Software Gen Payroll is a payroll management software made by SAG Infotech . It eases and automates the process of payroll. The software’s features are tracking employee attendance, calculating salaries, ensuring compliance with laws like PF (Provident Fund), ESI (Employee State Insurance), and TDS (Tax Deducted at Source), as well as generating payslips. Businesses, whether small or large, can use this software. ...

SAG Infotech: Need Tax Software (Call 0141-4072000)

Search This Blog