It is safe to say that it is still a work in progress, marred with technical glitches. The government must combat bogus invoicing but while doing so it is pertinent to take care of taxpayers and compliance burden of the businesses.
Bringing into effect provisions of Finance Act,2021
From the coming year, ITC on an invoice can be availed only when details of such invoice/debit note have been furnished by the supplier in his outward supplies (GSTR-1) and these have been communicated to the recipient of such invoice (GSTR-2A/ 2B). In other words, the recipient will be able to avail the ITC with regard to its inward supplies only when these are reported by the supplier in its GSTR-1 and after which such supplies are reflected in the GSTR-2A/2B of the recipient.
Once these provisions come into effect, the Rule 36(4) of CGST Rules, 2017 which allows the provisional ITC of 5% can be said to have been discontinued owing to the fact that the amendment has been done in the CGST Act itself.
Additionally, an amendment in this regard to Rule 36(4) of CGST Rules as recommended by the 45th GST Council meeting is also expected to be made soon. There will not be any provisional credit given to the taxpayer.
Here’s a history of development of the provision:
Implications of the change
This change has been made by inserting a provision in the Act itself, which rules out the possibility of challenging the condition on any account but the constitutionality of the provision. Businesses now need to introduce stringent contractual terms with the supplier to offset the loss caused in case they fail to upload invoices or upload incorrect invoices of supplies provisioned to recipients under GSTR-1 or due to any other technical flaw. Simultaneously, it is important to have a robust and timely reconciliation setup.
In a nutshell, the situation calls for a robust compliance system, vendor management, sufficient contractual safeguards and stringent measures for recovery of the amount paid to the supplier.
(The writer is Founder Partner, Tattvam Advisors)
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