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GST transitional credit: Taxpayers claim Rs 65,000 crore as refund of Rs 95,000 crore collected under GST. Govt orders probe

The Goods and Services Tax regime allows tax credit on stock purchased during the previous tax regime. This claim is available only up to 6 months from the date of implementation of GST.

Mail Today Bureau | New Delhi, Saturday, September 16, 2017 | 10:05 IST

The government has received a rude shock with a whopping Rs 65,000 crore of the Rs 95,000 crore collected as GST in July being claimed back as transitional credit by taxpayers. The tax authorities are now scrutinising all such cases where the sum exceeds Rs 1 crore.

The Goods and Services Tax (GST) regime, which came into effect from July 1, allows tax credit on stock purchased during the previous tax regime. This claim is available only up to 6 months from the date of implementation of GST. The Central Board of Excise and Customs (CBEC), the apex body which administers control over indirect taxes, has in a letter dated September 11 asked tax officials to verify GST transitional credit claims of over Rs 1 crore made by 162 entities.

In the transitional credit form TRAN-1 filed by taxpayers along with their maiden returns for July, businesses have claimed a credit of over Rs 65,000 crore for excise, service tax or VAT paid before the GST was implemented from July 1. CBEC has in a letter to all chief commissioners said that carry forward of transitional credit is permitted only when such credit is permissible under the GST law and in the light of such huge claims the issue has to be closely looked into.

"The possibility of claiming ineligible credit due to a mistake or confusion cannot be ruled out. It is desired that the claims of input tax credit of more than Rs 1 crore may be verified in a time-bound manner,'' the CBEC letter states. It asked the chief commissioners to send a report to the CBEC by September 20 on the claims made by these 162 companies.

To ensure only eligible credit is carried forward in the GST regime, the CBEC has asked field offices to match the credit claimed with closing balance in returns filed under the earlier law. Finance Minister Arun Jaitley had told journalists after the GST Council meeting last week that as many as 70 per cent of the 60 lakh taxpayers had filed returns for July, amounting to maiden revenue of Rs 95,000 crore under GST.

The finance minister was upbeat on the success of the new tax regime. However, it has now turned out that the input tax credit (ITC) data for Central GST (CGST) claimed in TRAN-1 has shown that registered businesses have claimed over Rs 65,000 crore as transitional credit. The government, in late August, had come out with form TRAN-1 for businesses to claim credit for taxes paid on transition stock.

Traders and retailers had 90 days to file for a claim. Also, businesses have been allowed to revise the form once till October 31. Under the transition rules, traders and retailers are allowed to claim a credit of 60 per cent of taxes paid earlier against the CGST or SGST dues where the tax rate exceeds 18 per cent. In cases where the GST rate is below 18 per cent, only 40 per cent deemed credit will be available against CGST and SGST dues.

Further, the government would also refund 100 per cent excise duty on goods that cost above Rs 25,000 and bear a brand name of the manufacturer and are serially numbered such as TV, fridge or car chassis.

To avail this, a manufacturer can issue a Credit Transfer Document (CTD) to the dealer as evidence of excise payment on goods cleared before the introduction of GST. The dealer availing credit using CTD will also have to maintain copies of all invoices relating to buying and selling from the manufacturer, through intermediate dealers.