Government Clarifies On High Transitional Input Credit In July GST Collections

Taxpayers have not yet claimed the entire Rs 65,000 crore worth of input credit for the month of July, the government said on Friday, seeking to put to rest concerns that the government’s revenue collections would be hit.

The July GST collection of Rs 95,000 crore was paid in cash, the government said in a press release. Media reports that taxpayers had claimed Rs 65,000 crore input credit had raised concerns that government’s indirect tax collections for the month will be lower than expected.

Central excise and service tax credit worth Rs 1.27 lakh crore was pending as on June 30, but the entire sum will not be valid for claims as some of it may be under litigation, the statement said.

It will be interesting to see how much of the Rs 65,000 crore has been utilised against the July tax liability, and how much balance credit would be carried forward, Abhishek Jain, partner-indirect tax at EY India, told BloombergQuint . “…This would give better clarity on the overall GST collections of the government,” he said.

Taxpayers have the option to avail credit for taxes paid on inputs under GST, similar to credit given for central excise and service tax paid earlier. According to transition rules, traders and retailers are allowed to claim a credit of 60 percent of taxes paid on items with tax rate exceeding 18 percent. For items with GST rate below 18 per cent, only 40 percent deemed credit is available.

Also Read: Exporters Worried Rs 65,000 Crore May Get Stuck In Input Tax Credit

‘Working Capital Not Blocked For 66% Of Exports’

The government said working capital won’t be blocked for 66 percent of shipments as exporters availed the duty drawback scheme instead of taking actual refund of input taxes prior to GST.

Under the scheme, exporters don’t have to pay customs duty, central excise and service tax on any imported materials used as an input in manufacturing goods for exports. The scheme was extended for three months till September 30, provided the exporter does not claim input tax credit under GST.

The remaining 33 percent of exporters used to get refund after the actual exports, which entailed a delay of five to six months. They used the advance authorisation scheme under which duty-free import of inputs for goods for export is allowed. “Hence, the problem is not as grievous as it is made out to be,” the statement said.

Suranjan Gupta, additional executive director at Engineering Export Promotion Council of India, didn’t agree. In the pre-GST regime, refund on excise duty using this scheme was paid within 30-45 days, Gupta told BloombergQuint.

PK Shah, board member of EEPC India, said that no micro, small and medium-scale enterprises avail advance authorisation scheme, and pay GST while procuring raw materials. MSMEs then have to pay integrated GST while exporting goods.

The government said that it is trying to find a way to give refunds by linking form GSTR 1 with GSTR-3B. For July, last date for filing GSTR-1 is October 10, and the authorities will be able process refund applications. “In the meantime, we are also finding other ways of giving refund, if necessary through a manual procedure,” the release said.