New Delhi: The finance ministry on Tuesday urged businesses to revise any wrongful claim of tax credits from the previous indirect tax regime saying that “extraordinarily high" claims unsettles the trust between firms and the tax authorities.

In a statement, the ministry warned that assessees who have erroneously claimed tax credit from the previous regime should correct them by 27 December, the last date for doing so, or face consequences.

“Taxpayers who have claimed transitional credit erroneously are advised to avail of the opportunity to revise Form TRAN-1 by 27th December, 2017 and ensure that only correct and bonafide credit is availed in transition, failing which the tax administration would be constrained to initiate audit and enforcement action against the identified units," said the ministry. The tax authority allowed revision of the form to encourage voluntary compliance.

Although adjusting credit for taxes paid in the previous regime against goods and services tax (GST) liability is allowed, the tax administration is worried that businesses using it way beyond the usual pattern can adversely affect tax collected in cash. Under pressure from businesses and small tax payers, federal indirect tax body GST Council has already made several relaxations in tax filing procedure which could delay realisation of higher revenue collections in the new regime. Also, the focus in the transition period is to assist businesses to adapt to the new regime, rather than taking enforcement action.

Tax authorities are examining large claims of tax credits—those above Rs1 crore—carefully. On the basis of the closing balance of tax credits from the previous regime reported in form TRAN-1, businesses could avail tax rebates in the GST regime.

The ministry statement said that some taxpayers have availed extraordinarily high transitional credit of Central GST (CGST) which it said was neither commensurate with the trend of input tax credit of the industry nor of the taxpayer in the past. While some businesses may have a “bonafide explanation" and some instances may be “bonafide mistakes," there may not be any genuine explanation for some cases.

“Analysis to identify such units is underway. Such behaviour leads to breach of trust between the taxpayer and the tax-administration, which is the bed-rock of self-assessment regime in GST," said the ministry.

“Quantum of opening credit claimed has been a concern for the government. Therefore, the press statement nudges businesses to carefully look at their claims and revise it if needed. Large claims would most likely be scrutinized by the authorities in next few months," said Pratik Jain, partner and leader of indirect taxes, PwC India.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via