Govt seeks explanation for transition credit; only 690K GST returns filed

Close to 160 companies could start receiving notices seeking explanations on the amount of transitional GST tax credits claimed by them over the coming weeks, even as the number of taxpayers who have filed their GST returns for August remains far below the figure expected by the government. 

In the run-up to the introduction of the single production levy, the indirect-tax department will begin sending notices to several companies after the Central Board of Excise and Customs (CBEC) last week directed chief commissioners to verify any transitional credit claim over Rs 1 crore, the Economic Times reported on Tuesday while citing people who knew of the development. According to the report, close to 160 companies, which have collectively claimed around Rs 65,000 crore in transitional tax credits due to the implementation of the Goods and Services Tax (GST), would be part of the exercise. 

As reported earlier, significant refunds claimed by entities for their pre-GST stock has left the government startled. For the close to Rs 95,000 crore of revenue collected for July till September 9, around Rs 60,000 crore was claimed as input tax credit for taxes paid for the period before July 1, according to state official sources.

The input tax credit for the transitional period has been claimed through the TRAN 1 form. Companies had a 90-day period from July 1 to claim credit for the excise duty already paid on inputs. 

"We are still evaluating the number of input tax credit claims. It seems to be too large. It is not adding up," Revenue Secretary Hasmukh Adhia had said at the Business Standard GST Roundtable on September 6.

Speaking to ET, a tax official said that many companies were suspected of having claimed credit without backing the claim with proper invoices. Further, according to the report, industry trackers have said that transitional credit claims amounting to Rs 65,000 crore when total GST revenue for July stood at Rs 95,000 crore appeared to be disproportionate.

Further, according to the financial daily, some companies, especially certain Hyderabad-based infrastructure firms, could be asked to produce their value-added tax (VAT) returns for the past one year. 

Where are all the GST returns?

Less than 48 hours remain before the deadline (September 20) to file GST returns for August expires. However, even at this eleventh hour, only 690,000 taxpayers had filed their GSTR-3B returns till Monday, the Indian Express reported on Tuesday while citing sources. Despite the September 20 deadline, data accessed by the national daily show that only 499,000 taxpayers had filed their 3B returns for August until September 17. 

According to the report, the government expects about 6.4 million taxpayers to file returns for August, from 4.6 million taxpayers who filed their returns for July. Further, the total number of taxpayers registered under GST is 8.5 million. 

Bihar Deputy Chief Minister Sushil Kumar Modi, who is leading the group of ministers (GoM) constituted to look into technical glitches in the Goods and Services Tax Network (GSTN), appealed to dealers to not wait until the last day to file returns. He added the heavy rush to meet the deadline would put pressure on the system.

GSTN glitches to blame?

As reported earlier, traders have complained that it takes as much as 12 hours to update a form, and in many cases, the site is inaccessible. This has had an impact on the filing of returns.

The GoM has identified a set of common issues after talking to corporate entities such as Unilever, various state tax department officials, and tax consultants. At its first review meeting in Bengaluru, the GoM asked vendor Infosys to fix these glitches by October-end.

Led by the Bihar Deputy CM, the GoM will review progress on this task every fortnight.

Since September 15, GSTN officials have met several large enterprises, including Unilever, and over 80 tax officials from various states. Further, they interacted with tax consultants who help file returns for the nearly 8.5 million taxpayers registered with the indirect tax system.

Infosys officials were also involved in identifying the set of universal glitches: Inability to rectify errors, lack of forms, issues regarding processing applications, and bugs in the software that slow the system.