- Industry is urging the GST Council to allow payment of reverse charge mechanism (RCM) liability using available input tax credit (ITC), instead of requiring cash payment first and then claiming credit.
- The current cash-payment requirement under RCM is said to create working-capital blockage and credit accumulation, especially for businesses with large unused ITC balances.
- The issue is seen as more acute for sectors such as FMCG, pharma, footwear and automobiles, particularly after large capex and GST rate cuts under GST 2.0.
- Tax experts say using accumulated credit for RCM would help businesses with inverted-duty structures, including import of services where 18% cash outflow can arise despite excess credit balances.
- Industry also wants broader measures to liquidate accumulated GST credits and make the tax system more seamless and revenue-neutral.
Source: a2ztaxcorp.net
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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