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Businesses face losses in tax credits on suppliers’ defaults

Businesses face losses in tax credits on suppliers’ defaults

With the Centre revving up the tax compliance drive using the technology infrastructure of goods and services tax (GST), businesses are facing delays or losses in tax credits owing to supplier defaults. Industry watchers said the losses could be as much as 7% of the working capital of large companies having sales of over RS. 500 crore. It could be worse for mid and small companies.

The government seems to be putting the onus on businesses to ensure tax compliance by their material and service suppliers.

Considering that GST is levied on value additions at every stage of the supply chain, non-compliance at any stage by an entity impacts flow of input tax credit across the supply chain. Businesses are denied credit when their suppliers default in remitting the collected indirect tax amount to the exchequer

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