Industry has demanded that interest paid on ineligible input tax credit score, which was availed however not utilised underneath the products and companies tax (GST) regime, be refunded.
At its current assembly, the GST Council exempted these credit from interest charges with impact from July 1, 2017, when GST was launched. It, nonetheless, didn’t make clear whether or not interest already paid might be refunded.
Sandeep Sehgal, director, tax and regulatory, AKM Global, a tax and consulting agency, stated, “The treatment needs to be clarified where the taxpayers have already paid interest.” Abhishek Jain, tax associate at EY, stated the query is whether or not a refund can be paid to these taxpayers who’ve already discharged interest in such a state of affairs.
“The government should come up with explicit clarity for such taxpayers as well and allow refunds to compliant taxpayers,” he stated.
The levy of interest on availed however unutilised input tax credit score is a topic of great disputes in GST since its implementation.
The credit score availed stays as a e book entry and income can be at no loss except it’s utilised for fee or taken again as refund, Sehgal stated. He added that levying interest on them has led to many disputes and litigation. This has now been addressed by the council at its current assembly in Lucknow. The council additionally decreased the speed of interest from 24 per cent to 18 per cent on ineligible tax credit score availed and utilised.
Since the council determined to not levy interest on these ineligible input tax credit, those that already paid interest might take recourse to Article 265 of the Constitution, which states that no tax could be levied besides by the authority of regulation, stated Sehgal.
However, there must be readability underneath the GST legal guidelines as nicely, he stated.
Section 17 (5) of the Central GST Act offers an inventory of conditions the place input tax credit score is not going to be obtainable. These embrace outside catering, magnificence remedy, life and medical health insurance and journey advantages prolonged to workers on trip equivalent to go away or residence journey concession.