India Inc., looking to scale down inventory ahead of the expected rollout of the goods and services tax (GST) on July 1 to overcome the tax credit problem, may have something to cheer about. The GST Council will consider raising input tax credit from the current 40% at its meeting on Saturday.
According to the draft transition law, companies can get credit of up to 40% of their central GST liability against excise duty already paid on stocks lying with traders or retailers when GST is implemented.
This has prompted many in the consumer goods sector to cut down on inventory lying with distributors, dealers and stockists. Industry had lobbied the government and the GST Council on the issue seeking an increase.
The government is keen to ensure that transition to the new tax framework is smooth for both businesses and consumers.
Pratik Jain, leader, indirect tax, PwC India said that if the percentage of deemed credit increased, it would be a big relief for industry, particularly where the GST rate on products is 28%. “It would minimise the impact on sales in the last month before introduction of GST,” he added.
The council will also take stock of preparedness of the GST Network, the mechanism for implementing the anti-profiteering provision and rules for return forms.