How Enforcing Input Tax Credit Will Dent The SME Economy

Long before Goods and Services Tax (GST), India’s biggest tax reform since independence, got approved by the parliament, accountants, lawyers, tax-paying enterprises and even technology companies had a chance to participate in its drafting by sending their suggestions and apprehensions. 

However, neither the tax paying community nor the government could make good use of these laws; as a result, India's small and medium enterprises (SME) are facing a huge threat in the form of input tax credit. 

As per the GST Act, an enterprise can reduce the tax already paid on inputs when it is paying tax on output; this is commonly referred to as 'input credit.' 

It necessitates that every B2B transaction that a single company does with every party be computed monthly. As per this, enterprises have to capture every invoice to confirm how the corresponding party (supplier or buyer) captured it. 

Tax authorities can then be able to check if the business is understating the number of business transactions and their values. 

In India, there are more than 6.5 million businesses that have to do these computations; this means that there would be around 1.2 billion to 2 billion invoices getting uploaded every month, and that too after both parties agree on every transaction. 

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