A “large part” of the ₹65,000 crore of transitional credit claims received by the government under the Goods and Services Tax regime are ineligible for refunds, a senior Finance Ministry official told The Hindu , adding that the investigation of all such claims is under way.
Firms can claim transitional credits for inputs bought and taxes paid before GST rollout. The official pointed out that even where claims were accepted, refunds would be done in a staggered manner over months, and not as a single lump sum.
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He explained that this was because the accumulated credit was more than what could be claimed on manufacturing output in a single month.
“The investigation and audit of these [₹65,000 crore worth of] transitional credit claims are under way, but we have already found that a large amount of them are not eligible for refunds,” the senior official said on condition of anonymity as the audit was still on.
“We are also finding that the companies behind these claims are just trying their luck. They know these claims are not eligible, but still they try.”
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“This is anyway not that big an issue,” the official added.
Tax experts say that the reason behind so many ineligible claims being submitted was the constantly changing rules and deadlines relating to the form for the availing of transitional credit — the TRAN-1 form —and that the audits being conducted so far were causing undue panic among businesses since the deadline to revise the filings is still more than a month away.
“During the September 6 GST Council meeting, it was decided that the last date for the submission of the TRAN-1 form would be extended to October 31,” Sachin Menon, National Head of Indirect Tax at KPMG India, said. “But in implementation, the original deadline of 90 days from the rollout of GST [September 28] was retained, and it was decided that those who meet that deadline will be allowed to revise their forms up to October 31.”
“This caused companies to rush to fill the forms, since they already had to fill the GSTR-3B form and prepare for the GSTR-1 form, and that is probably why so many errors have occurred,” Mr. Menon added. “In any case, the audits being done by the tax officials are causing undue panic because companies still have a lot of time to revise their applications. It is opening the way for an inspector raj once again.”
The Central Board of Excise and Customs had last week directed tax officials to verify the GST transitional credit claims so far made. The Goods and Services Tax Council will meet next on October 6, earlier than the previously announced date of October 24.