GST Authorities issuing GST Input tax credits Mismatch Notices to firms

Goods and services tax Department has started issuing notices to several companies & firms, after finding a mismatch in Input tax credits claimed by using analytics tools embedded in the GSTN software.

As per GST Rules, Both Supplier and the buyers are required to file the respective Returns. Supplier is required to File GSTR-1 by 11th of the Following month and GST Credit of the Goods and Services purchased will be reflected in GSTR2B. Buyer of the Goods and Services is required to claim the GST credit reflected in GSTR2B only. The GST Department agency then compares the amount of GST paid to the amount of tax credit requested.

The tax agency’s analytics department discovered these disparities in company returns. Companies can use the GST Input Tax Credit to offset a portion of their future tax burden against GST paid on raw goods received from suppliers. Often there are mismatches between Tax credit reflecting in GSTR2B and Tax Credit Claimed in GSTR3B.

The GST Authorities are issuing Show Cause notices to the Companies and Firms asking the reason to explain the tax differences. Earlier as per GST Rules mismatch in tax credit reflecting in GSTR2b and GSTR3B up to 20% was allowed, which has now been brought down to 5%. The tax notices come at a time when many companies are facing cash-flow issues and are highly dependent on smooth tax refunds.

As per Rule 36(4) Input tax credit [ITC] to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded in GSTR-1, shall not exceed 5 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in GSTR-1.