Revised GST legislation may pinch working capital of industries

gst legislation

The revised draft of the goods and services tax (GST) legislation tabled in Parliament on Monday could put pressure on the working capital of industries and spark greater litigation in the coming years, analysts said.

According to the provisions of the central GST law tabled in the Lok Sabha, taxpayers can claim credit only on the basis of receipt of goods or services. The earlier version of the draft had provided for the facility of provisional credit, which has now been done away with. So, even if a taxpayer has made an advance payment, he cannot claim credit until he receives the entire consignment.

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Further, entities purchasing from unregistered dealers will have to pay GST to the government under a reverse charge mechanism, placing further burden on the working capital of firms. The provisions also say telecom towers and pipelines will not be able to avail of credit in a GST regime. This seems to be in line with judicial precedent where they have been held to be inputs and not capital goods, analysts said. The earlier provision in the GST law provided that every capital good will be able to avail of credit over a period of two years. For telecom towers and pipelines, the credit could be deferred over a period of three years.

Live mint, 29 march 2017

 

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