The flow of Input Tax Credit (ITC) is one of the backbones of the new economic reform that is GST. However, taxpayers who were hoping to have a seamless transition to the new regime are in for a slight shock. The GSTR-3B form that was to be filed for the transition period of July-August does not have a column for carrying over ITC from the previous regime. If there is no clarification on this soon, companies may have to end paying the GST for the months of July and August in full, leaving them cash strapped for the rest of the year.
Experts say that the government has put in various rules for transition to GST, of which the carrying forward of ITC is an extremely important provision. In fact, even those companies that do not have proof of ITC (unregistered dealers in the previous regime) are eligible for 40% ITC on transitioning to GST. Hence, the fact that the GSTR-3B form does not allow taxpayers to use available ITC to settle their tax liability goes against the spirit of the new tax system. If ITC is not made available for the transition period of July-August, it would mean a serious financial crunch for large companies (like those in the automobile sector) which have a huge chunk of money languishing as ITC.
As reported in Economic Times
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