Exporters get relief on input tax credit

The government has offered relief to exporters on input tax credit under the goods and services tax (GST). Earlier, the Central Board of Indirect Taxes and Customs had clarified that input tax credit would be restricted to those inputs reflected in the input form of purchasers.

Whenever a supplier submits a seller form — GSTR 1A — items on it would automatically reflect in purchaser’s input form — GSTR 2A.

The issue arose when some suppliers didn’t have the GSTR 1A form, given they don’t come under the country’s jurisdiction.

Exporters in India who import items for the purpose of exports will not get these inputs reflected in their GSTR 2A form, clarified Abhishek Jain, tax partner, EY.

The same problem arises with those paying GST under reverse charge mechanism (RCM). Normally, a person or entity providing services or goods pays tax to the exchequer, and recovers it from the receiver of the service or goods. But under RCM, the receiver of the service or goods pays the tax by deducting it from the payment to sellers.

Those with input service distributors (ISD), too, face a similar issue. This happens when the headquarters of a company is located elsewhere but distributes the inputs used from its other offices. In this case as well, the office outside the headquarters would not get inputs reflected in their GSTR 2A. The government has now kept imports, ISD, and RCM out of the purview of its move to limit input tax credit to inputs reflected in GSTR 2A.

Jain said, “This will help provide significant relief to India’s foreign exchange earners facing serious onground challenges on refund claims of unutilised input tax credit.”