In a major setback to the flood-affected business community in Kerala, the GST department may send notice to the manufactures, stockists, retailers and shopkeepers if they have claimed input tax credit under goods and services tax, and have to cough up penalties and interest on that.
A directive issued by the indirect tax department or Deputy Commissioner State GST Department Mattancherry tells tax officers to disallow input tax credit for goods destroyed in the floods.
An input tax credit is a mechanism whereby a seller of goods or manufacturer gets the refund of taxes already paid on raw material when he sells the goods.
“… input tax credit shall not be available in respect of good lost, stolen, destroyed written off or disposed of by way of gift or free samples,” the directive issued by a deputy commissioner from the state GST department said. The credit claimed has to be reversed in any such circumstances, it said.
“Officer may issue show cause notice … requesting him (businessman) to pay the amount specified in the notice along with interest and (at 18%) and penalty.”
While the directive may be well within the rules, industry experts questioned the timing of it. Tax experts said this could open a Pandora’s box and many businessmen may have to cough up additional taxes at a time when they have incurred losses due to the floods.
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