Non-compliance may block ITC flow
yes, you heard it right. GST council’s recommendation includes this clause to curb the frauds. The high volume of raising the bills and then not depositing it has saddened the exchequer. We can read the news of so many GST fraud. But the government is unable to deny the ITC in case of a fraudulent supplier. Now they want to fix a linking between the supplier and the recipient. Unless the supplier will file the GSTR 1, he will not be able to pass on the ITC. Non – compliance will block ITC flow.
This will ensure the linking of ITC with the payment of tax. but then taxpayer are bound to oppose it. This is going to hurt many genuine taxpayers. How they will be able to control the compliance of some other person. They will be liable to bear the loss of 18% or less depending on the rate of tax for their particular supply.
You can follow some tips to prevent this hit:
- Shift your business to compliant vendors.
- Ensure and follow up for compliance.
- Make a term in agreement for recovery of losses due to non-compliance.
- Make a clause for interest on amount of ITC delayed.
- Release the payment of tax only when the relevant compliance is done by the vendor.Â
