AHMEDABAD: To simplify the process of filing goods and services tax (GST) returns and curbing tax evasion, the GST Network (GSTN) recently launched a prototype of its new proposed system of filing returns. However, experts believe that certain provisions in the new system could affect inflows of input tax credit (ITC) to taxpayers, thus denting working capital of industries by up to 30%. The discussion was taken up at a conference ‘GST 2.0 – Unresolved Issues and Challenges’ organized in Ahmedabad on Tuesday by Assocham India.
Mitesh Jain, assistant director of PricewaterhouseCoopers Ltd, said, “As part of the new system, GSTR-1 and 3(B) will be scrapped and replaced by a single return, GST RET-1 along with Annexures-1 & 2. Under this system, a taxpayer will not be able to claim ITC on goods purchased, till the vendor/supplier has filed a return.”
“Consequently, if your vendor does not file a return, you cannot claim ITC. Non-compliance will dent working capital of industries significantly and this will occur initially, as soon after the new system is implemented. Blocking of input tax credits will have adverse implications on business operations, because manufacturers often operate on wafer-thin margins in our cut-throat competitive world,” he added.
Jain explained that the proposed system aims to curb the practice of claiming ITC illicitly by using fake invoices, which is costing the exchequer dear.
Source : https://timesofindia.indiatimes.com/city/ahmedabad/gst-2-0-could-deal-30-hit-to-working-capital-initially/articleshow/69656448.cms