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GST: You can’t claim ITC if your vendors fail to upload invoices

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Latest GST News: Govt restricts the ability of businesses to avail input tax credit (ITC) if their vendors fail to upload their invoices on time. Also, the ITC will be restricted on a monthly basis.

So far, you might have been claiming ITC (input tax credit) based on your own invoices.
For eg: You would claim credit for Rs 1000 based on your own accounts even though your vendor has uploaded invoices for supply worth Rs 800 only. And this would get verified once a year, during GSTR-9 filing. Here too, you were required to be answerable only for the unmatched credit amount Rs 200 (Rs 1000 – Rs. 800). This no more works!!!

The new rules say that input tax credit on unreported invoices should not exceed 20% of credit on eligible invoices.

Assume ‘Company A has purchased items with Rs 1,000 in GST paid.

I.e. ‘Company A’ has Rs 1,000 in input tax credit on its books.
Now, let’s say vendor “Company ‘B’ has uploaded invoices with GST payments of only Rs 700, and Rs 300 worth is unreported invoices.
So far, ‘Company A’ could’ve claimed the full Rs 1,000 as an input tax credit. But now only 20% of Rs 700 can be claimed. I.e Rs. 140.
In this example, ‘Company A’ would only be able to claim Rs 840 as a credit (Rs 700 + Rs 140).

So far, reconciliation of invoices between buyers and their suppliers was done yearly—now it would need to be done on a monthly basis,

How will this affect small businesses like you?
 You would be able to claim much lower input tax credit, hence have to pay more tax, resulting in lost business.
 This would create huge cash-flow issues for taxpayers, especially small businesses like yours.
 It becomes very difficult and time consuming for vendors to issue, confirm and upload invoices on a monthly basis.


What do you think about this change? Please comment below

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