- Messing up the GST returns will cost you dearly!
- Know Rules on Wrongful ITC Claim
- What are the regulations of Sebi and GST department?
GST Fake ITC Claim Warning : If you are a businessman and paying GST, then ITC is very important for you. This allows businesses to deduct GST paid on their purchases from their GST liability on sales. This relieves both business expenses and cash flow. What exactly is the whole issue” GST Fake ITC Claim Warning
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ITC is not available on every purchase. If a trader takes ITC on non-creditable purchases or uses wrong ITC, it can cause problems. Interest and penalty are charged in such cases. The rate of interest on wrongly taken and utilized ITC is 18% per annum.
What is ITC?
Suppose a trader pays ₹18,000 GST while purchasing goods. Later, he recovered ₹30,000 GST on selling those goods. As per rules, if he is eligible to claim ITC of ₹18,000, he can avail it against his GST liability. This means, he will not have to pay the entire ₹30,000 to the government. After the ITC is adjusted, his tax liability will decrease. But, this benefit is available only when both purchases and ITC comply with GST norms.
A merchant has to fulfill several conditions
Having a bill is not enough to claim ITC. Merely having a tax invoice is not enough to claim ITC. A merchant has to fulfill several conditions. For example, the goods or services must have been actually received. The supplier should have entered the relevant information accurately in the GST system and the buyer should have reconciled his entries with the statement like GSTR-2B.
If the supplier does not record the invoice or there is any mistake in it, the buyer's records also cause problems in ITC. Hence, it is important for businesses to reconcile their purchase records with their GSTR-2B.
What is the 180 day rule?
There is another important rule in GST. If a business purchases goods and does not pay the supplier within 180 days from the date of invoice, the ITC collected on that purchase may have to be added back.
When will 18% interest apply?
There is a difference between wrongly claiming ITC and underutilizing it. As per GST rules, interest is charged on wrongly taken and utilized ITC. The interest rate on such ITC is fixed at 18% per annum. Interest is calculated based on the time the incorrect ITC is availed.
For example, if a business mistakenly claims ITC worth ₹1 lakh and uses it, it is not sufficient to simply refund ₹1 lakh. As per the rules, interest may be applicable and penalty may also be levied depending on the status of the case.
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