The government is examining industry concerns over the denial of input tax credit (ITC) on goods and services used to construct immovable property for its own use, according to senior government official.

The issue is being discussed with states, but no agreement has been reached yet on easing the restriction, the official said at an industry interaction organised by the Bengal Chamber of Commerce and Industry (BCC&I).

“Discussion with states is going on,” the official said, adding that he would not comment further on the matter because of this.

The issue relates to companies being unable to claim GST paid on certain goods and services used to construct immovable assets such as offices, factories, and global capability centres (GCCs).

The official’s remarks assume significance amid industry expectations that the issue could be considered by the GST Council. However, he indicated that the matter had not reached a stage where any decision could be announced.

According to the official, a distinction needs to be made between cases where a supplier exists but has failed to file its return or pay the tax and cases where the supplier is subsequently found to be non-existent.

The official referred to Rule 37A, saying that a recipient could take credit but would have to reverse it if the supplier did not fulfil the prescribed conditions within the relevant period.

If the supplier subsequently pays the tax, the recipient can again get the credit, he said.

In cases where the supplier is found to be non-existent, the department’s position is different because the existence of the underlying supply itself comes into question.

The official estimated that only 1-2 per cent of cases fell in this category, although the figure could not be independently verified.

The official said the broader direction of the GST administration was towards greater automation, greater trust in taxpayers, and less intervention and litigation.

The move is intended to provide clarity on issues that arise across states and sectors and ensure that a legal principle decided by the tribunal is followed uniformly across the country.

He said the tribunal had discussed the approach among its judicial and technical members before deciding to take up certain cases together.

The approach could help deal with the transition phase of the GSTAT, and also where similar disputes involving the same taxpayer, industry or legal issue arise in multiple states.

Source: Business Standard