GST: Companies with High Input Tax Claims under Tax Scanner

Input Tax Refund

In a bid to curb tax evasion, the Central Government has initiated an investigation on the companies who claimed  high input tax credit under the GST rgeime.

With this, the businesses using using input tax credit or reported a significant variation in turnover are being queried by taxmen.

The Tax officials have sent emails seeking information from businesses that paid over 95% of their dues using input tax credit to ascertain the key factors responsible for subdued GST collections. These queries relate to a large variation in turnover reported, negative growth in central GST liability & a wide divergence in input tax credit between GSTR 2A and GSTR3B.

In some centres, businesses have been even asked to furnish tax payment challans. GSTR 2A and GSTR3B are return forms. The first includes all information related to purchases, the second is a simplified return form aimed at making life easier for filers. GST was rolled out on July 1, 2017. Tax experts said revenue pressure appears to be driving the inquiries.

“There is an increasing trend by the department to conduct such enquiries over an email, more so with revenue pressures at the end of the financial year,” said Bipin Sapra, partner, EY. “This needs to be avoided as there are proper mechanisms in law like annual returns and GST audit reports which are yet to be filed and which will provide the complete details being sought by the department.”

Recently, the Institute of Chartered Accountants of India (ICAI) western regional council has written to tax authorities questioning the practice. The authorities have been relying on multiple sources to verify information and ascertain whether there’s been any deliberate move to suppress tax payments. There have been multiple cases of companies trying to evade payments by submitting fake invoices to claim input tax credit.