Pave The Way For Smooth GST Credit Claims With Proper Documentation
The Input Tax Credit (ITC) is an integral part of the Goods and Services Tax (GST) system that allows companies to recoup some of the tax they’ve already paid on their inputs by applying it to their final output tax bill.
To successfully file an ITC claim, supporting documentation is essential. To be eligible for a GST credit, documentation of the transactions between the supplier and the receiver of goods or services is necessary per GST law. Invoices, receipts, bills of supply, debit notes, credit notes, and any other applicable papers that confirm the transaction and the tax amount paid are examples of such documents.
Recent case laws have also emphasized the importance of documentation for claiming GST credit.
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In the case of M/s Bharat Heavy Electricals Ltd. Vs. The Commissioner of Central Tax, the Madras High Court held that the Input Tax Credit (ITC) cannot be denied merely on the ground that the recipient does not have the tax invoice, as long as there is sufficient evidence to prove the transaction. However, it is important to note that this case pertains to a specific situation and that it is generally advisable to have proper documentation to avoid disputes
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In the case of M/s Raheja Development Corporation Vs. The State of Maharashtra, the Bombay High Court held that the ITC cannot be denied on the ground of non-submission of Form GSTR-2A, as long as the recipient has other documents to establish that the tax has been paid by the supplier.
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M/s National Plywood Industries Ltd. Vs. Commissioner of GST & Central Excise, Cuttack - In this case, the tribunal held that the ITC cannot be denied merely on the ground of non-availability of physical copies of the invoices. If the taxpayer can provide other evidence to substantiate the claim, such as digital copies or other supporting documents, then the ITC should be allowed.
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M/s Meghalaya Steels Ltd. Vs. Commissioner of GST & Central Excise, Shillong - In this case, the tribunal held that the ITC claim cannot be denied merely on the ground that the supplier did not upload the invoice on the GST portal. If the taxpayer has the invoice and other supporting documents to prove the eligibility of the ITC claim, then it should be allowed.
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M/s Gokuldas Exports Vs. Commissioner of Central Excise, Bangalore - In this case, the tribunal held that if the taxpayer can prove the receipt of goods and payment of taxes through other documents, such as the purchase order, delivery challan, and bank statement, then the ITC claim cannot be denied merely on the ground of non-availability of the tax invoice.
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State of Karnataka Vs. Ecom Gill Coffee Trading Private Limited (Supreme Court) – In the context of Karnataka VAT (KVAT) Act, 2003 has held that the dealer claiming input tax credit has to prove beyond doubt the actual transaction by furnishing the name and address of the selling dealer, details of the vehicle has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. Mere production of the invoices and/or payment by cheque will not be sufficient. The similar ruling can be used by GST officers for verifying GST credit in current regime
These cases highlight the importance of proper documentation for claiming GST credit and provide some guidance on the types of evidence that can be used to prove a transaction. However, it is always advisable to maintain proper documentation as required under the GST laws to avoid any disputes or penalties in the future.
Taxpayer should maintain the documents required as per GST law for claiming Input Tax Credit (ITC) by following the steps below:
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Develop a SOP for keeping records in accordance with GST. (i.e Define the responsibilities of each person in the process of collecting and maintaining records related to GST. This includes the person responsible for collecting GST, the person responsible for recording and reconciling GST transactions, and the person responsible for storing GST records.)
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Educate the business teams: Teams must be made aware of the GST regulations and the paperwork they must submit to get ITC. Give them a list of papers they need to save and emphasize the need of keeping detailed records. Below steps can be considered on how to educate your business teams on GST regulations for claiming GST credit:
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Provide training sessions: Provide training sessions for business teams on GST regulations, including how to claim GST credit. These training sessions can be conducted in person or online and can be led by a tax professional or someone within the organization who is knowledgeable about GST.
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Share resources: Share resources such as articles, guides, and videos on GST regulations and claiming GST credit with business teams.
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Create a reference guide: Create a reference guide for business teams that outlines the key GST regulations for claiming GST credit. This guide can be used as a quick reference when questions arise.
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Conduct regular reviews: Conduct regular reviews with business teams to ensure that they understand GST regulations and are correctly claiming GST credit. This can be done through one-on-one meetings or group sessions.
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Encourage questions: Encourage business teams to ask questions if they are unsure about GST regulations or how to claim GST credit. This will help ensure that everyone is on the same page and that mistakes are avoided.
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An audit by external agency/professionals should be considered based on various parameters (such as complex structures, number of transactions, number of states in which registration has been taken etc), which can be beneficial for several reasons as stated below:
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Ensure compliance: An external audit may assist in ensuring that the taxpayer is in conformity with all applicable GST legislation and standards. This may save the taxpayer money by avoiding penalties and fines for noncompliance.
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Identify mistakes: An external review may assist in identifying any inconsistencies or inaccuracies in the taxpayer's GST records. This may assist the taxpayer in correcting any errors and avoiding under- or over-claiming GST credit.
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An external agency may give professional advice and help on claiming GST credit, including any changes to GST legislation and procedures. This may assist the taxpayer in remaining current and in compliance with the most recent GST rules.
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Increase confidence: An external assessment may help taxpayers feel more confident in their GST records and claims. This might assist the taxpayer in avoiding problems or difficulties from the tax authorities during a GST audit or review.
In summation, handling GST credit can be a challenging job for companies, but with the correct knowledge and approach, the process can be streamlined and simplified. Best practises for handling GST credit have been outlined in this piece, such as maintaining thorough records, submitting reports promptly, claiming input tax credits, and consulting experts as needed. Observing these procedures not only ensures that the company is in full accordance with tax laws, but also helps maximise the financial advantages to the company. Overall, a company’s bottom line will improve if its GST credit is managed properly, leading to lower expenses and higher profits.
Pankaj Ghosal
Experienced Chartered Accountant with a demonstrated history of working in the financial accounting industry. Skilled in Internal Audit, Accounting and GST compliance and litigation matters. Strong finance professional graduated from The Institute of Chartered Accountants of India.
