Business fears hit to cash flow from new GST input tax credit restriction

Gupta of ClearTax feels a further reduction in credit could have been considered later

Industry fears that the Goods and Services Tax (GST) Council’s decision to further restrict input tax credit (ITC) on invoices not uploaded in the relevant form would block the cash flow of businesses, says the latter, at a time when they’re struggling on finances due to economic slowdown. 

On Wednesday, the Council approved a proposal to restrict ITC to 10 per cent of eligible credit, against the current 20 per cent, for such invoices. 

The mechanism works this way: Suppose you paid Rs 1,000 as taxes to your suppliers and claimed this as ITC on your summary input-output form, GSTR 3B. You