The government is planning to put further restrictions on claiming input tax credit and will examine a proposal to completely restrict availing of credit by new taxpayers. The proposal was discussed in the third national GST conference of state and central tax officers chaired by Finance and Revenue Secretary Ajay Bhushan Pandey, according to a government statement.
The proposal was in the works for a while and was discussed in the previous GST Council meetings, a government official said on the condition of anonymity. This would help curb “pop-up firms” created solely to pass on fraudulent credit from evading taxes, the official said. Input tax credit is the credit businesses get for taxes paid on inputs. This comes after the government imposed restrictions on input tax credit to 10 percent of invoices uploaded by the taxpayers’ suppliers from 25 percent earlier. The move was preceded by investigations that revealed some taxpayers had issued bogus invoices to avail input tax credit.
The government would also prepare a standard operating procedure for blocking and unblocking of input tax credit for taxpayers, according to the statement. The government had blocked input tax credit of about 1,000 taxpayers who allegedly claimed more credit than they were eligible for, BloombergQuint had earlier reported. The government will also explore measures such as capping of value for calculating export benefits and incentives, the statement said.