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Your GST input tax credit claim is now safe.
Your GST input tax credit claim is now safe.
How do you feel if you get punished for mistakes of others? Is it not cruel? And how would you react if law knowingly punishes you for error of your seller? GST law was doing so. GST law had provisions to reverse your input tax credit claim if your seller didn't deposit his GST dues. But now in their 27th meeting, the GST Council has made some changes in GST law. These changes would save you a little from reversals, but not entirely.
What do you do if someone snatches and runs away with your mobile phone?
Can you ask the police to pay you for the phone because the theft occurred in their area?
Before you call it silly, I will request you to read the provisions on claiming "Input tax credit."
It is my apprehension that the provisions were quite similar to the stealing incident above.
GST law stated that "Input tax credit" will not be given to you if the seller doesn't deposit the GST that he recovered from you.
Now, do you find them similar?
Ok, let me explain it through an example.
Before that, can you recollect these three points of GST law?
1. Sellers should charge GST from buyers at the time of sale.
2. They, ie, sellers should deposit this GST with Government.
3. They can reduce the deposit amount by the GST that they have paid to their suppliers.
Now here is the example:
1. Say you sell mobile-phones.
2. And you buy them from Ranchod.
3. Ranchod sold you 100 mobile-phones for Rs44,80,000. 4. He charged you Rs4,80,000 for GST.
5. You further sold these phone for Rs56,00,000.
6. You charged Rs6,00,000 for GST.
7. You deposited Rs1,20,000 for GST. Rs 1,20,000 = 6,00,000-4,80,000.
8. Rs.4,80,000 is Input tax credit claim made by you.
9. Ranchod didn't deposit his part of GST, i.e., Rs4,80,000.
10. GST department will reverse your ITC claim because Ranchod didn't deposit.
11. And would ask you to deposit Rs4,80,000.
12. But you have already paid Rs4,80,000 to Ranchod
13. Shouldn't GST department ask Ranchod to deposit, instead of charging it from you?
Perhaps GST council could perceive this in their 27 meeting and have resolved that now they would not recover GST dues from you but from the seller.
However, if they can't recover it from the seller because he has closed the business or some other genuine reason, then they may come back to you for recovery.
