Importers availing tax credit on extra taxes paid under I-T lenses

GST Department now has started issuing notices to the importers for availing of the tax credit against the additional GST paid due to valuation for past year

GST Department now has started issuing notices to the importers for availing of the tax credit against the additional GST paid due to valuation for past years
The tax professional has pointed out that regulations allow importers to ascertain valuation of their imports and pay GST and other duties on that. In most cases, importers provide valuation detail through the bill of entry which is a legal document that is filed on arrival of the imported goods. GST department in the last two months initiated an inquiry into the bill of entry and discovered discrepancies in the valuation of many imports. Importers were then asked to pay additional taxes for goods imported in 2018/19 as penalty.

An important issue which arises is whether the importers can avail of input tax credit on the additional taxes paid for the earlier years. There are hundreds of such notices issued to importers in the last few weeks. For example, a company had imported goods worth Rs 10 and paid Rs 1.80 Cr as taxes on that. Tax department’s scrutiny found that the goods should have been valued at Rs 15 and additional taxes of up to Rs 90 Lakh should be paid over it. Many companies have even added Rs 90 Lakh towards the input tax credit, and the tax department has issued notices in such cases.

It may be noted that the credit restriction does not apply to credit availed on imported goods in case of reassessment of bill of entry which is a statutorily recognised taxpayer document for availing credit. The condition qua time limit is applicable only in respect of invoice or debit note. As a corollary, there cannot be any denial to either credit or refund.