Input tax Credit (ITC) should be correctly recorded in the books of accounts. Timely recording in books is of great advantage. It helps in working capital management.
Sometime the invoices are received at the reception of the office but not forwarded to the accounts department. And sometime the invoices are with the procurement team but due to service pendency or issue in service the invoice is held by that department. These practical business issues leads to delay in accounting the invoices. These invoices then remain as a reconciliation item in the GST return working.
GSTR-2B is a facilitation of the government to the recipient to make them aware that these are their purchases. We can say that it is similar to 26AS statement of Income tax. GSTR-2B credit cannot be directly accommodated in the books because they are only a reflection of your suppliers’ compliance to you, and not a complete purchases. But certainly a very helpful report which a tax payer can rely upon and comply GST.
IMS (Invoice Management System) is a real time statement where invoices uploaded by the vendor is populated in it. Even if you don’t follow the IMS procedure of acceptance, rejection and on-hold activity but certainly you can use it so ascertain the purchases you made during the period. You may also follow up with the vendor or with internal stakeholder to collates invoices so that you can record it in books of accounts timely.
Tax should be paid by the vendor to the government. This is one of the condition given u/s 16 of CGST Act, 2017 to take ITC as you already aware of. Some vendors does their tax compliance through a tax consultant. With the volume of work the consultant has they may skip to upload your invoice in the GSTR-1 return. It may also happen that tax is also not paid to the government. In such cases, the ITC is denied to you (buyer). You must highlight it to the vendor and give opportunity to regularise the compliance by uploading the invoice and making payment to the government. If that does not happen even after repeated request then you may recover the tax component from your vendor ledger.
In line with this, you may enter a GST clause in the agreement (oral or written) that if GST is not populated in GSTR-2B then you will be withholding the GST component. Since you already paid the tax component to the vendor , getting ITC rejected would end paying tax again to the government. Hence, recovering that part from the vendor is a correct course of action. Also, the vendor is not suppose to profit out of the tax collected from buyer. He is an agent of the government. He must remit that tax to the government. He is an agent in the manner that he collects the tax from customer and remit to the government. He cannot skip doing his job.
As an alternate , I think the GST can work like TDS (Tax deducted at Source) where buyer withhold GST from the payment to the vendor and deposit it directly to the government. So, every transaction would be reported in return on monthly basis (as many taxpayer are monthly filer) and it would populate to the vendor for offsetting against their GST payable.
In this TDS like compliance the challenge would be that the buyer need to make the payment to government on monthly basis despite of the payment terms agreed with the vendor. The payment terms are 30 days , 60 days or in some cases 90 days. This is generally followed. Exceptional payment terms of 180 days or more also exist in a commercial transaction.
What do you think of any other challenges if TDS concept of tax payment introduced in GST? Put you thoughts in the comment section below.
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