News:Government has decided to restrict input tax credit under the goods and services tax to 20% of the eligible amount for an entity if its supplier has not uploaded relevant invoices detailing the payments made.
- There was no such restriction until now as input tax credit was claimed by taxpayers on the basis of self-assessment.
- This decision is aimed at curbing the menace of fake invoices and boost cash flow.
- However, the apprehension is that it will increase the workload for assessees and a higher burden on companies until the full input tax credit can be claimed.
About Input tax credit:
- An input may refer to any goods that are used by the businesses in order to create the finished products provided to the end users.
- The input tax credit mechanism allows GST registered businesses to receive refunds on GST paid for the purchase of such inputs to prevent the cascading taxation effect.
- Cascading effect is when there is a tax on tax levied on a product at every step of the sale.The tax is levied on a value which includes tax paid by the previous buyer which makes the end consumer pay tax on already paid tax.