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False Vs. Missing Input – GST

Input Tax Credit in GST – False Vs Missing Input

Input Credit remains to be one of the most discussed parameter of GST right from it’s inception. The issue is quite sensitive as well since it is directly linked to cost and profitability of the business of any taxpayers. In other word, the only attractive aspect of GST to the taxpayer is the coverage of its input tax credit part which was not available in any other taxation system previously.  

However, whether or not the Input tax credit part of GST, will be beneficial for the taxpayer, depends upon two major concepts under Input tax credit and they are False and Missing Input.  

Let us now, understand the concepts of both False and Missing Inputs in a most simple way.

What is False Input in GST?

The Input which has been shown in GST return by any tax payer but not shown by his corresponding supplier is called False Input in GST

A Case study given below will clarify this issue

Mr. A has purchased goods worth Rs. 1000/- from Mr. B and paid a GST amount of Rs. 100/- to Mr. B

While filling GST Return, Mr. A has shown Rs. 100/- as Input Tax Credit and reduced his sales liability

On the other side, Mr. B has not shown the GST amount of Rs. 100/- paid by Mr. A in his GST Return as Liability

In this case Rs. 100/- claimed by Mr. A, as Input Tax Credit shall be treated as False Input.  

What is the process by which False Input can be determined  and How anyone can know that ?

There is an option in GST Portal which is called GSTR2A. The tax payer will find the details of his  suppliers who has shown his paid GST amount s in their corresponding GST return, in GSTR 2A

Hence, reconciliation of GSTR 2A will give a clear picture to the tax payer about the details of suppliers who has not shown his paid GST amount and therefore the total GST input taken against their supplies shall be treated as False Input

What a tax payer need to do in case of False Input ?

 The tax payer is required to refund the false input amount by showing it as additional sales liability

What is the time period by which False input amount is required to be refunded ?

False input can be refunded at any point of time and in any GST Return within a financial Year. However in case any tax payer is carrying it forward for the whole Financial year , then he has to refund the same at the time of filling Annual GST Return . Without payment of false input, as additional liability , the Annual return filling is not possible

Will there be penal interest applicable while refunding False Input claim ?

Yes

Will there be any compliance actions initiated against the supplier who has denied the taxpayer from genuine input ?

Yes. But the initial compliance action will be taken against the taxpayer since he has taken the Input. Later on, action will also be initiated against the supplier

False Input therefore is a completely loss making proposition in GST for any Taxpayer and hence due care is required to be taken to avoid the same

The following steps should be taken therefore to ensure that the issue of False Return does not arises

  • GSTR2A is required to be checked on a regular basis
  • Following up of defaulter suppliers who may be denying genuine input is required
  • Doubtful inputs should not be taken

What is Missing Input in GST? 

Missing Input is the GST Input which has not been taken into consideration while filling GSTR 3B but available in GSR2A.  

Is Missing Input a valid GST Input?  

Yes it is a valid GST Input which can be taken at any point of time even though missed in scheduled monthly or quarterly GST Returns.  

What is the final date line for taking Missing GST Input for filling GST Return?

Missing Input must be taken within the same financial year

Missing Input is therefore beneficial item for any taxpayer in comparison to False input . Missing Input neither attracts penalty nor compliance issues rather it adds up to cost saving part of the business and therefore contributes to the profitability of the business

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