The tax department lens on businesses with more than 1 crore GST claims

An amount of Rs.65,000 crore out of Rs.95,000 crore tax collections in July, which is the first month of GST, has been claimed as transitional credit by the taxpayers, prompting the CBEC for a scrutiny of all the cases exceeding Rs.1 crore. GST allows tax credit on the stock purchased in the previous tax regime. The facility is available upto 6 months from the implementation of GST.

Central Board of Excise and Customs is the body that deals with the formulation and implementation of policy concerning the levy and collection of indirect taxes. It has asked the tax officials to verify the GST transitional credit claims of more than Rs.1 crore which is made by 162 entities. In the transitional credit form TRAN-1, taxpayers in their maiden returns for July have claimed a credit of Rs.65,000 crore for service tax, excise or VAT paid before the implementation of GST from 1st July.

In this case, the possibility of claiming ineligible credit due to a mistake cannot be ruled out. Hence, the claims exceeding Rs.1 crore will be verified in a time bound manner. The chief commissioners have been asked to send a report to the CBEC by 20th September on the claims made by 162 companies. In order to ensure that only eligible credit is carried forward in the GST regime, CBEC has also asked the field officers to match the credit claimed with the closing balance in the returns filed under the previous tax regime. They are also required to check if the credit is eligible under the GST law.

Until last week, about 70 percent of 59.57 lakh taxpayers had filed returns for July which amounted to maiden revenue of Rs.95,000 crore under GST. However, the input tax credit claimed has shown an amount of Rs.65,000 crore as transitional credit.

The government had come out with the form TRAN-1 in late August, for businesses to claim credit for the taxes paid on the transition stock. Traders had 90 days to file for a claim. Businesses have been allowed to revise the form once before October 31st. Under the rules of transition, the traders are allowed to claim a credit of 60% of the tax paid earlier against SGST or CGST dues where the rate exceeds 18%. Where the rate of GST is below 18%, only 40% deemed credit will be available against CGST and SGST dues.

In addition, the government will refund 100% excise duty on goods that cost more than Rs.25,000 and bear a brand name of the manufacturer as well as are serially numbered like TV, car chassis or fridge. In order to avail this, a manufacturer can issue a Credit Transfer Document to the dealer as evidence of the excise payment on goods which were cleared before the implementation of GST. The dealer will also be required to maintain copies of all invoices related to buying and selling from the manufacturer.

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