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New GST Rule May Affect Business

The All Kerala GST Practitioners Association voiced apprehensions on Wednesday, stating that the recent implementation of Rule 37A in the Goods and Services Tax (GST) framework could have adverse effects on businesses. The rule introduces a significant change in input tax credit (ITC) reversal, potentially burdening buyers with the tax liability if the seller fails to fulfil their tax obligations.

Under Rule 37A, if a supplier is unable to pay taxes on time, the buyer becomes responsible for settling the tax and interest on behalf of the seller. The conventional GST process mandates that the selling entity reports the tax in the GST return as per the issued bill. However, with the new rule, if the supplier only files GSTR 1 without submitting GSTR 3B within the stipulated time frame, the buying firm must pay the ITC shown on the bill along with interest.

GST practitioners, such as Santosh Jacob, express concerns about the potential double burden on buyers, emphasising the need for stringent provisions to transfer tax responsibility from the seller to the buyer. Rule 37A sets a deadline for addressing issues in the tax returns of the financial year 2022-23 by November 30, 2023, to avoid ITC reversal.

The business community remains watchful as this new rule unfolds, mindful of its potential implications on tax liabilities and operational complexities.

Monika Shanmugam