Many companies unable to optimise Input Tax Credit claims for FY21: Survey
In the year 2020- 21, nearly 83% of more than 1,200 companies surveyed by ClearTax were unable to optimise input tax credit(ITC)forcing most of them to hold payments of non-compliant vendors, said the cloud-based taxation services startup.
For instance ,a multinational company in India incurred a total loss of Rs 850 crore due to suboptimal management of claiming Input Tax Credit(ITC). This comprised Rs 50 crore of ITC not filed and Rs 800 crore of interest loss on delayed filing by vendors.Another lifestyle company registered a loss of about Rs 200 crore due to ITC mismanagement, Rs 30 crore of ITC not filed and Rs 170 crore of interest loss on delayed filing by vendors, according to ClearTax.
As per Clear Tax, Mid-sized enterprises also suffered due to suboptimal ITC management, with losses of Rs 15-20 crore, it said. More than 10 million enterprises in India need to claim ITC in 2021.The study says that almost a third of companies find the process of ITC claims extremely laborious and cumbersome. It points towards the inefficiencies in the return filing journey of an average enterprise. 40% of the GSTINs file quarterly returns which also delays ITC,” said ClearTax. “This new practice requires the enterprises to perform their purchase reconciliation on a more frequent basis as vendor payments are processed accordingly.” Apart from increasing awareness and efficient vendor management, there is a need to make the process of refund of unutilised ITC more seamless, ClearTax said, adding that the respondents in the survey expressed the need for an automated refund process. “This will help businesses in getting back their money on time thereby allowing better working capital management. It will also help them save time and reduce manual efforts,” it said.
ClearTax said the survey was aimed at finding the pain points of availing input tax credit without any delay. However, it refused to disclose the identity of the multinational company that suffered Rs 850 crore loss or the lifestyle firm that incurred Rs 200 crore of losses, citing non-disclosure agreements.The startup, which counts Max, IKEA, Myntra, Marriott and Taj Group among its top clients, said the respondents were from industries such as cement, automotive, textiles, construction, infrastructure, pharmaceuticals, hospitality, banking and financial services, technology, consumer goods, logistics and transportation.