The GST law committee has approved a proposal that would protect buyers' Input Tax Credit (ITC) in cases where suppliers fail to deposit GST, provided certain conditions are met. Buyers will retain their ITC if the supplier has reported the invoice in GSTR-1, which reflects in GSTR-2B, and if the buyer can prove payment of the invoice, including GST, through banking channels or other accepted documents.
This marks a shift from the current GST framework, where buyers might lose ITC even after fully paying the supplier. The new proposal acknowledges that buyers have limited control over suppliers' tax compliance after sales. Instead of reversing ITC from genuine buyers, tax authorities will now pursue recovery from the defaulting supplier.
The proposal emphasizes GSTR-2B as the main document for ITC verification, with banking evidence serving to demonstrate the buyer's genuine intentions. While the proposal seeks to protect legitimate taxpayers, it also maintains measures against fake invoicing and tax evasion by targeting non-compliant suppliers rather than compliant buyers.
For more details, visit: https://m.economictimes.com/news/economy/policy/gst-law-panel-clears-proposal-to-shield-buyers-input-tax-credit-from-supplier-defaults/articleshow/132318994.cms
Key Pointers -
- Buyers would retain ITC where the supplier has reported the invoice in GSTR-1, resulting in its reflection in GSTR-2B, and the buyer can establish payment of the invoice value, including GST, through banking channels or other prescribed documents.
- Instead of reversing ITC from bona fide purchasers, tax authorities would initiate recovery proceedings against the defaulting supplier, marking a significant departure from the existing GST framework.
- Under the current regime, buyers may lose ITC despite having paid the supplier in full. The proposal recognises that purchasers have limited control over a supplier’s post-sale tax compliance.
- The proposal reinforces GSTR-2B as the primary compliance document for ITC verification, while banking evidence would serve as proof of the buyer’s bona fide conduct.
- While offering protection to genuine taxpayers, the proposal retains safeguards against fake invoicing and tax evasion by ensuring recovery action is directed at non-compliant suppliers rather than compliant buyers.
https://m.economictimes.com/news/economy/policy/gst-law-panel-clears-proposal-to-shield-buyers-input-tax-credit-from-supplier-defaults/articleshow/132318994.cms
