Summary of this article
Indigo airlines is facing Rs. 1.27 crore penalty on input tax credit in GST
Here are the details of ITC and what to do if penalty is imposed
Indian airline Indigo has been charged with a penalty of over Rs. 1.27 crore due to input tax credit-related discrepancies on Goods and Services Taxes. The airline said that it will challenge the order slapped by the GST Authority.
In a filing to the exchanges, the company’s parent, InterGlobe Aviation, said that it availed of input tax credit, which has been denied. The company also said that the demand order was received to pay the penalty along with interest from the Office of the Joint Commissioner of State Tax, Appeals. IV Bandra, Mumbai.
"The company believes that the order passed by the authorities is erroneous and it has a strong case on merits, backed by advice from external tax advisors," the company said in its filing.
The fine was imposed for the period of July 2017 to March 2018, which amounts to over Rs. 1.27 crore. The company also noted that while the demand will be contested, it will not impact the financials of the company.
Here are the steps if one receives a penalty on input tax credit availed, and what it means.
What is Input Tax Credit?
Input tax credit (ITC) is a key part of the GST framework, which allows businesses to lower their tax liability. Businesses claim credit for the GST already paid when purchasing inputs or raw materials for their businesses. The credit is claimed by the businesses to avoid double taxation and prevent a cascading effect on taxes.
In order to claim ITC, the business must have a valid tax invoice, along with the goods and services received on which the tax has already been paid. Businesses generally use the ITC for purchases made related to the business, which includes expenses on capital goods.
What to do if a penalty is imposed?
If businesses receive notice that a penalty has been imposed by the tax authorities, the first step is to review the notice and understand what violations have been highlighted in the demand. This, along with the deadline for response, should also be looked at. With the advice of proper counsel, it is important to act promptly and either pay the penalty or file an appeal or a request to waive the penalty, showing reasonable cause.
Typically, a notice gives 30 days to review and respond to the demand order. If one fails to respond within the deadline, a higher penalty or interest could be imposed. In case of an appeal or a request for waiver of the fines, a genuine reason for non-compliance must be shown. If there has been a mistake or error due to which the penalty has been imposed, an updated GST return may be filed following the due process.
