Many businesses that provided discounts, reduced prices, or extended payment cycles to customers amid the Covid-19 pandemic have approached the government to clarify the impact of goods and services tax (GST) on these amounts.
According to tax experts, enterprises that issue credit notes or credit memorandums – which are given to consumers when money isn’t paid straight away – are witnessing a GST impact.
The pandemic saw many customers renegotiating prices offered by companies – from manufacturing companies to information technology firms – and credit notes have been issued across sectors, experts said.
GST is typically paid when an invoice or bill is issued, and businesses are now finding it difficult to claim credit or amend taxes already paid when they have not received payment from clients or have received reduced amounts.
“IGST element on the credit note issued is not treated as an input tax credit and as a corollary there is a restriction in the system to adjust IGST with CGST or SGST,” said Abhishek A Rastogi, partner at law firm Khaitan & Co.
Source Business Fast
