FISME urges CBIC to introduce safe harbour for bona fide buyers

Industry body FISME has urged the CBIC to protect bona fide GST buyers from suppliers' defaults, expedite refunds and simplify compliance to improve ease of doing business

Industry body Federation of Indian Micro and Small & Medium Enterprises (FISME) has urged the Central Board of Indirect Taxes and Customs (CBIC) to introduce a statutory "safe harbour" for bona fide buyers under the Goods and Services Tax (GST) regime, saying genuine businesses should not lose input tax credit (ITC) — the credit businesses claim for GST paid on purchases to offset their tax liability on sales — because of suppliers' defaults.

 

In a memorandum submitted to the CBIC, FISME said micro, small and medium enterprises (MSMEs) are increasingly being denied input tax credit due to subsequent defaults by suppliers, retrospective cancellation of registrations or alleged irregularities further up the supply chain, despite having exercised reasonable due diligence. It proposed that input tax credit should not be denied where the recipient has a valid tax invoice, has received the goods or services, paid through banking channels, and there is no evidence of fraud or collusion. Recovery, it said, should instead be pursued against the defaulting supplier.

 

The industry body also sought a time-bound mechanism for processing GST refunds within 30 to 45 days, with automatic payment of interest in cases of delay. It further recommended allowing annual refunds of accumulated input tax credit where credits remain unutilised, saying delayed refunds continue to lock up working capital, particularly for exporters and businesses affected by inverted duty structures.

 

To simplify compliance for businesses operating across states, FISME recommended early implementation of the proposed One PAN-One Administration framework, under which companies would have the option of centralised GST compliance and pooling of input tax credit across GST registrations under the same Permanent Account Number (PAN). It also called for implementation of the Home State Principal Place of Business (HSPPOB) model approved by the GST Council, along with uniform documentation requirements and timelines for registrations across jurisdictions.

 

FISME further urged the tax administration to publish an annual GST technology roadmap and provide at least three to six months' lead time for significant compliance changes. It also sought sandbox testing and a penalty-free transition period to help businesses and software providers adapt to new technology requirements.

 

To reduce litigation, FISME proposed faceless adjudication, issue-wise electronic proceeding locks, consolidated notice dashboards and mandatory reconciliation before the issuance of show-cause notices. It also suggested that once an issue has been examined and concluded, it should ordinarily attain finality to avoid repeated disputes.

 

The industry body also recommended a one-time rectification or settlement mechanism for bona fide procedural errors committed during the initial years of GST implementation and the Covid-19 period, covering financial years 2017-18 to 2022-23. It said fraud provisions should be invoked only where supported by clear evidence.

 

Among other suggestions, FISME called for automatic reconciliation of import tax data between the Indian Customs Electronic Gateway (ICEGATE) and the Goods and Services Tax Network (GSTN), acceptance of Bills of Entry as sufficient proof of tax payment, and simplified compliance norms for e-commerce businesses. It proposed self-approval for changes in additional places of business and business-to-consumer (B2C) digital invoicing through QR codes in place of mandatory paper invoices.

 

It also sought greater consistency in GST administration through national guidance notes, mandatory speaking orders, meaningful personal hearings, risk-based assessments and regular capacity building of field officers.

 

FISME said its recommendations do not seek any relaxation in tax obligations but are aimed at improving certainty, reducing compliance costs, unlocking working capital and strengthening voluntary compliance. It said addressing these issues would make GST administration more efficient, transparent and taxpayer-friendly while improving the ease of doing business for MSMEs.