• Notification Date: 13-11-2021
• Notification No: 30/2021-22

Notices to firms due to GST tax credit discrepancies

Goods and services tax authorities have started issuing notices to many companies, after discovering a mismatch in tax credits through deep analytics tools embedded in the GSTN software.

"The tax department’s analytics division has found these discrepancies in returns filed by companies", industry trackers said.

The GST framework enables companies to keep a part of their future tax liability against GST paid by them on the raw materials received from suppliers.

As per the GST framework, both supplier and the company have to upload receipts on the tax department’s website.

Thereafter, the tax department matches the GST paid with the tax credit claimed.

Often, there is a mismatch found between the figures furnished by the supplier and the tax credit claimed by the company. In these cases, the tax department can disqualify the tax credit claimed for the whole transaction. Few authorized consultants advising corporations which have received such notices mentioned that the division’s notices have given extra time to corporations.

“As per the process, the adjudicating authority ought to have first scrutinised the returns and served a notice in case there was any discrepancy or mismatch. This would have given the assessee an opportunity to undertake rectification, if required. Only if there was a failure on the part of the assessee to rectify the discrepancy or mismatch, should the assessing officer have issued a show-cause notice,” mentioned Abhishek A Rastogi, a companion at regulation agency Khaitan & Co.

The tax division states that the scrutiny of returns is just not a compulsory step, and the authorities have the benefit to immediately subject a show-cause discover. The authorities had earlier permitted a 20% mismatch, which has now been reduced down to 5%. The tax notices are issued when many corporations are dealing with cash-flow points and are extremely dependent on clean tax refunds.