GST authorities have issued notices to several companies due to discrepancies in input tax credit, signaling increased scrutiny by tax officials.
Numerous companies are now under heightened scrutiny from the Goods and Services Tax (GST) authorities as they have received notices highlighting discrepancies in the input tax credit (ITC) claimed. The notices come as a result of a comprehensive examination of the ITC claimed by these companies, revealing inconsistencies when compared with their annual returns.
The issuance of notices falls under the purview of Section 150 of the CGST Act, 2017, mandating taxpayers to furnish an information return elucidating the reasons behind the “short reporting” of input tax credit.
“Short reporting” refers to instances where the input tax credit declared in the annual return form (GSTR-9) is less than the amount claimed in the monthly forms (GSTR-3B or GSTR-2B). GSTR-3B functions as a monthly self-declared summary of GST returns, while GSTR-2B is an auto-generated form that outlines details of eligible and ineligible Input Tax Credit (ITC) for each month.
Businesses and experts contend that, although the law allows officials to request an information return, many notices are issued mechanically, without verifying whether taxpayers have genuinely utilized the Input Tax Credit (ITC), thereby contributing to compliance burdens.
“Numerous notices have directed taxpayers to mechanically reverse even unclaimed Input Tax Credit (ITC) in GSTR-3B, without any critical analysis,” expressed one expert, raising questions about the rationale behind reversing unclaimed ITC.
In a post-budget interview with ET, Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs, underscored that the department cannot ignore an Input Tax Credit (ITC) mismatch detected within the system.