Finance

Published: Mar 20, 2023
Updated: Mar 20, 2023

Know the factors which may result in Input Tax credit in GST being blocked

The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. One of the significant advantages of the GST system is the input tax credit (ITC) mechanism. Input tax credit is the tax paid by a registered taxpayer on inputs and input services used in the course of business, which can be claimed as a credit while paying output tax. However, certain circumstances can trigger the blocking of input tax credit in GST India.

1.Non-compliance with GST provisions:

The input tax credit can be blocked if the taxpayer fails to comply with the GST provisions, such as not filing GST returns, not paying taxes due, or not registering under GST, etc.

2.Non-payment of supplier's tax:

Input tax credit can be blocked if the supplier has not paid taxes on the supply made to the recipient. The recipient can avail of the input tax credit only if the supplier has paid the GST on such supply.

3.Goods or services not used for business purposes:

Input tax credit is available only on goods or services used for business purposes. If the goods or services are used for personal consumption or for non-business purposes, input tax credit cannot be claimed.

4.Blocked by the Government:

The government can block input tax credit under certain circumstances, such as when the taxpayer has claimed excess input tax credit, or when there is any discrepancy found during the GST audit, or when the taxpayer has not complied with the anti-profiteering provisions, etc.

5.Fraudulent activities:

Input tax credit can be blocked if the taxpayer has engaged in fraudulent activities such as issuing fake invoices, claiming input tax credit on fake invoices, or misrepresenting facts.

6.Mismatch of invoice details:

Input tax credit can be blocked if there is a mismatch in the invoice details, such as the GSTIN of the supplier or the recipient, the invoice number or date, or the value of the supply, etc.

The input tax credit is an essential component of the GST system, and its availability to the taxpayer depends on various factors, such as compliance with GST provisions, payment of supplier's tax, and use of goods or services for business purposes, etc. The blocking of input tax credit can have significant implications on the taxpayer's cash flow and business operations. Therefore, it is crucial for the taxpayers to ensure compliance with the GST provisions and avoid any fraudulent activities to avail of the input tax credit.