The Haryana government has announced a plan to safeguard its revenue against fraudulent activities by taxpayers. It has laid down guidelines to determine when the input tax credit under Goods and Services Tax regime can be blocked for a taxpayer. Experts are divided over the implications and the ability of the state tax department to issue such a circular.
The plan of action was set into motion last week via a circular issued by the Excise and Tax Commissioner of Haryana. It says that a tax officer can use the GST Network portal to block and unblock input tax credit. Input tax credit means that a supplier can reduce the tax paid on inputs from tax payable on outward supplies. The state tax department will be able to block the input tax credit in the electronic cash ledger. The e-ledger on the GSTN reflects details such as amount of tax deposited, balance input tax credit and GST liability.
Input tax credit in this ledger can be partly or fully blocked if:
- An investigation reveals that a registered taxpayer is bogus or fake.
- The firm is found to be non-functional.
- Excess transitional credit has been claimed.
- Input tax credit has been availed for supplies not used in the course or furtherance of business. Credit has been availed for supplies that the law doesn’t allow for.
- Input tax credit has been claimed contrary to the GST provisions. For instance, if a supplier has paid the tax on supplies and the recipient doesn’t have the tax invoice.