New Delhi: Federal indirect tax body the Goods and Services Tax (GST) Council on Saturday decided to ease the woes of businesses and traders relating to claiming tax credits on their inventory when the country shifts to the new indirect tax regime on 1 July.
Revenue secretary Hasmukh Adhia told reporters at a briefing in New Delhi on the Council’s 15th meeting that transition rules relating to claiming of tax credit on the inventory lying with them after 1 July have been modified.
As per the amended provision, traders, who cannot produce documents of the taxes paid on their inventory, can claim 60% of it as credit for meeting their central or state GST payable, if the tax rate on the commodity is 18% or more.
Also read: GST Council fixes rates for contentious items, gold at 3%, solar panels at 5%
The idea is that in the cases of commodities that attract a high tax burden, the taxes paid on the inventory in the current tax regime should not be denied as a credit after the transition. Businesses will get full credit if they produce documents of the taxes paid on inventory.
Earlier rules had allowed only 40% of credit on inventory after the transition if supporting documents are not available, which had raised fears that businesses will reduce their stocks in the weeks before 1 July that could impact consumption in the economy.
Sachin Menon, partner and head, indirect tax, KPMG in India, called the amendment in the rule a welcome step. “With this move, dealers need not return their pre-GST stock as their concern over loss of credit mostly stands addressed,” said Menon.
The Council, however, did not get enough time to deliberate on the anti-profiteering measures it wants to put in place to ensure that businesses and traders will pass on the benefit of reduced tax burden on commodities and services to consumers.
Also read: GST rollout from 1 July will have serious problems: West Bengal FM Amit Mitra
Finance minister Arun Jaitley, who was present on the occasion, explained that the Council will set up a committee with members from union and state governments that will look into complaints about profiteering by businesses.
Abhishek Jain, tax partner, EY, said clarity on how anti-profiteering provisions would be implemented at the ground level still remains elusive in the absence of detailed rules on the subject.