NEW DELHI: The Telangana top courtroom has ruled that no input tax credit (ITC) is available except GST returns are filed and a taxpayer is susceptible to pay penalty on all of the liability. The ruling is predicted to have an important impact on all companies that use tax credit available on inputs and raw materials to cut back fee in cash.
"...until a return is filed as self-assessed, no entitlement to credit and no actual entry in the electronic credit ledger takes place. As a consequence, no payment can be made from out of such a credit entry," Justices V Ramasubramanian and P Keshava Rao mentioned in a case involving Megha Engineering & Infrastructures and GST Authorities.
The corporate had behind schedule filing the GST returns from July 2017 to May 2018 when its tax liability added as much as Rs 1,014 crore. It had ITC of Rs 968 crore and it claimed that the shortfall was to the tune of Rs 45 crore. While the tax government demanded 18% passion on all of the quantity, Megha Engineering argued that passion will have to most effective be calculated on the net tax liability, after deducting ITC from the overall liability. The courtroom upheld the dep.'s view.
"The ruling has very wide implication as almost all taxpayers, who delayed filing returns and have paid interest only on cash payment of tax and not on the GST amount set off by them through ITC. The issue will open floodgate of litigation and demands of interest by GST officials are imminent. Even CAs while auditing Annual GST Returns, which have to be filed by June 30, may be required to point out short payment of interest due to delayed set off," mentioned tax legal professional RS Sharma.
Tax experts mentioned that companies have been depending on VAT rulings and clearing cash dues to workers and providers prior to paying GST and the ruling will change this custom. "Businesses should be very cautious in understanding the distinction between the VAT position and the GST position as the consequences could be very severe. This decision states this aspect very clearly," mentioned M S Mani, partner at Deloitte India.
Sharma mentioned some respite may come one day.
"...until a return is filed as self-assessed, no entitlement to credit and no actual entry in the electronic credit ledger takes place. As a consequence, no payment can be made from out of such a credit entry," Justices V Ramasubramanian and P Keshava Rao mentioned in a case involving Megha Engineering & Infrastructures and GST Authorities.
The corporate had behind schedule filing the GST returns from July 2017 to May 2018 when its tax liability added as much as Rs 1,014 crore. It had ITC of Rs 968 crore and it claimed that the shortfall was to the tune of Rs 45 crore. While the tax government demanded 18% passion on all of the quantity, Megha Engineering argued that passion will have to most effective be calculated on the net tax liability, after deducting ITC from the overall liability. The courtroom upheld the dep.'s view.
"The ruling has very wide implication as almost all taxpayers, who delayed filing returns and have paid interest only on cash payment of tax and not on the GST amount set off by them through ITC. The issue will open floodgate of litigation and demands of interest by GST officials are imminent. Even CAs while auditing Annual GST Returns, which have to be filed by June 30, may be required to point out short payment of interest due to delayed set off," mentioned tax legal professional RS Sharma.
Tax experts mentioned that companies have been depending on VAT rulings and clearing cash dues to workers and providers prior to paying GST and the ruling will change this custom. "Businesses should be very cautious in understanding the distinction between the VAT position and the GST position as the consequences could be very severe. This decision states this aspect very clearly," mentioned M S Mani, partner at Deloitte India.
Sharma mentioned some respite may come one day.
No input tax credit if GST returns not filed: HC
![No input tax credit if GST returns not filed: HC]()
Reviewed by Kailash
on
April 24, 2019
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