The indirect tax department in
Haryana has issued a circular, asking field officers to block input tax
credit on certain conditions drawing tax experts’ flak.
Though the reasons cited in the circular issued by the excise and taxation commissioner of Haryana to block the credit may be genuine such as unutilisation of inputs for furtherance of business, an expert said input tax credits are self-certified under the GST regime as of now and should not be interpreted this way.
Harpreet Singh, partner at KPMG, said, “It appears that the circular is vulnerable to legal challenge on account of being arbitrary, as it gives unbridled powers to officers to deny or block credit, without giving any opportunity to the assessee of being heard,” Singh said.
He said the circular merely enlists the scenarios wherein the officers may exercise the power to block the credit. Questions regarding unblocking of such credits, process to be followed by officers before and after blocking credits, whether blocking is temporary or permanent, remain unanswered, he added.
GST returns are being simplified after which the system of input credits will be streamlined. Till then, the credits are self-certified. In the last stage of returns simplification, the credit will be blocked if the seller has not paid GST to the government.
Though the reasons cited in the circular issued by the excise and taxation commissioner of Haryana to block the credit may be genuine such as unutilisation of inputs for furtherance of business, an expert said input tax credits are self-certified under the GST regime as of now and should not be interpreted this way.
The other reasons for blocking credit given in the circular are bogus,
or fake taxpayers, non-
functional firms, excess transitional credit and inadmissible credit under the GST law.
ALSO READ: How to make taxpayers comply with GST laws? CBIC now has a solutionfunctional firms, excess transitional credit and inadmissible credit under the GST law.
Harpreet Singh, partner at KPMG, said, “It appears that the circular is vulnerable to legal challenge on account of being arbitrary, as it gives unbridled powers to officers to deny or block credit, without giving any opportunity to the assessee of being heard,” Singh said.
He said the circular merely enlists the scenarios wherein the officers may exercise the power to block the credit. Questions regarding unblocking of such credits, process to be followed by officers before and after blocking credits, whether blocking is temporary or permanent, remain unanswered, he added.
GST returns are being simplified after which the system of input credits will be streamlined. Till then, the credits are self-certified. In the last stage of returns simplification, the credit will be blocked if the seller has not paid GST to the government.
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