The Central Board of Excise and Customs ( CBEC ) has started enquiring about Proprietary businesses, LLPs and HUFs, which took registration under GST between October 2016 and June 2017, for claiming input tax credit.
Reportedly, the CBEC has shared the list of such entities, along with the returns filed and transitional credit claimed, with the field officers.
This exercise is aimed at checking “unreasonable” transitional credit claims by those who have taken GST registration in the run-up to the rollout of Goods and Services Tax from July 1, 2017.
It is reported that several traders and small businesses obtained registration under the new tax regime to claim excise and service tax credit which was only available to manufacturers in the erstwhile excise, service tax, and VAT regime.
Sources said that the preliminary scrutiny indicated that several newly created LLPs and HUFs, as well as proprietary firms, have claimed transitional credit for which they were not eligible.
Last week, the Board has already asked the Chief Commissioners to scrutinize all transitional credit claims of over Rs 1 crore.
During the transitional period, the taxpayers were allowed to claim input tax credit on the basis of the closing balance of the credit declared in the last return under the pre-GST regime by filing Form TRAN-1.
The companies are required to conduct to audit their accounts and hence the possibility of indulging in any dubious activities for short-term gains are riskier for them, compared to proprietors, partnership firms, and HUFs as these entities are not required to file information with the ministry, experts said.
