GST notices worth several crores continue to bombard the industry leaving India Inc in a tizzy as corporates have claimed credits while filing returns, which according to GST authorities have been blocked and thus cannot be claimed.

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According to sources, “the GST authorities are issuing notices in large numbers to companies so as to ensure that the notices are issued in a time bound manner.”

However, the fear of the industry is that the first adjudicating authority will confirm the demand and hence there will be an additional burden of litigation cost and pre-deposit amount for filing an appeal.

The matter of blocked credit has been a major issue, the apex court has been hearing the industry’s plea on the matter and recently has concluded the hearing on the crucial section 17 of CGST Act.

Supreme Court, yesterday has however, reserved orders with the direction to the petitioners – industry — to file the written submission so that the matter could be comprehensively addressed.

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In this matter, the plea was filed by several industry players having commercial complexes, malls, warehouses, factories, pharmaceutical companies and several other diverse sectors, who had raised the matter before several High Courts and then later it was taken up at the Supreme Court with respect to the statutory provision of blocking credits under the GST regime.

The credits are disallowed for works contract services, other services and goods which are used for construction of an immovable property.

“Revenue is of the view that the construction of an immovable property results in an asset which is not subject to GST and hence the credit must be denied. The industry is of the view that the credit cannot be denied , as the ultimate objective is not to create an immovable property but to render taxable services such as leasing services which are taxable, sources in the know of the development on the condition of anonymity added.

Abhishek A Rastogi, founder of Rastogi Chambers, argued for a dozen of tax payers that blocking of credit will defeat the fundamental objectives of GST framework and will lead to tax cascading. Rastogi had argued that “the objective of GST is seamless flow of credits and any blocking will ultimately defeat the basic objective. The procurement of goods and services, even if these are used in construction of a property, are ultimately used for rendering of taxable services/supplies.”

He added that “the non-obstinate clause used for the purpose of blocking the credit cannot go against the statutory framework. Accordingly, the provisions must be read in such a manner so as to block the credits, only for personal use or consumption, and that the credit must not be blocked when these transactions are for B2B cases.”

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Abhishek Jain, Indirect Tax Head & Partner, KPMG said, “With normal period of limitation ending on 30th September for adjudication of issues linked to FY 17-18, multiple notices were issued to taxpayers including substantive interpretative ones like taxation of online gaming, taxation of intra company supplies without a consideration, sector specific issues including rate of GST, credit reversals, etc."

"Similarly, various notices have been issued on routine reconciliation matters like differences in auto populated inward supplies qua credit claimed by businesses, inward supplies which were blocked under Section 17(5) but have not been reported as ineligible credit, etc. Businesses have been reconciling the actual credits claimed qua those disputed by authorities to substantiate their claim or dispose off any genuine dues,” he added.

(Edited by : Asmita Pant)

First Published:Oct 13, 2023 7:27 PM IST