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New Businesses can claim only 20% of Total Tax Credit

New Businesses can claim only 20% of Total Tax Credit

The Businesses while claiming credit for the Goods and Services Tax paid on raw materials and services who have not uploaded invoices the government has allowed them to do self-assessment while claiming credits.

They can claim only 20% of the total tax credits for which, the supplier has not uploaded invoices and also have not paid taxes government.

 A circular issued by Finance Ministry, these rules may be called the Central Goods and Services Tax (Sixth Amendment) Rules, 2019.

Under rule 21A the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension.

Under rule 36 input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under section 37(1) shall not exceed 20 per cent. 

The circular was meant for the businesses to do self-assessment while complying with the rules. 

This decision was made to improve compliance as a wrongful claim of tax credit is one of major way used by businesses for tax evasion.

The restrictions on availing of Input Tax Credit shall be based on self-assessment of taxpayers, and will not be imposed through common portal.

The time limit for furnishing details in Form GSTR-1 under section 37 or in Form GSTR-2 under section 38 has been extended. While furnishing GSTR-3B under section 39 one needs to comply with the manner an conditions as prescribed by the Commissioner.

GSTR 1- It is a monthly return meant to summarise all the outward supplies of a tax payer. The due dates of the same depends on the turnover. Every Registered person is required to file GSTR 1 even if there are no transactions in the following month.

GSTR 2-  It is meant for all the purchases made during the month. Every registered person is required to file GSTR 2 for all the purchases made during the month.

GSTR 3B- This form is meant to to consolidate the details of inward and outward supplies made in the month. It is basically a consolidated summary return.

 The circular introduced amendments in the existing laws that under rule 21A the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension. Under rule 36 input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under section 37(1) shall not exceed 20 per cent. 

The circular issued by Finance ministry was to improve the compliances of businesses and to prevent tax evasion in the economy.

Author:

eStartIndia Team



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