Experts flag input tax credit blockage for FMCG distributors despite GST relief

Kolkata, Sep 28 (PTI) The government’s recent circular has brought clarity on trade discounts and credit notes under the GST regime, but has shifted compliance obligation and cash-flow pressure onto FMCG distributors, experts said.

Indirect Tax Expert at LexVed Vedika Agrawal said the GST circular 251 makes it clear that financial or commercial credit notes - those issued without GST - do not require distributors to reverse their input tax credit (ITC).

Input tax credit is the tax a business unit pays on its purchases, which it can claim back to lower the tax it owes when it sells products or services.

“For manufacturers, this (the circular) ensures that past tax payments remain untouched. For distributors, however, the downside is clear: they continue to hold excess ITC (input tax cred