The implementation of the Goods and Services Tax (GST) during the initial period of 2017-18 and 2018-19 presented challenges in reconciling Form GSTR-2A and GSTR-3B.
Section 16 of the CGST Act 2017, which outlines the eligibility and conditions for availing Input Tax Credit (ITC), was identified as problematic in several cases during the initial GST implementation (i.e., 2017-18 and 2018-19).
It was observed that correct details of outward supplies were not consistently provided by the supplier in GSTR-1, leading to deficiencies or discrepancies in the recipient’s Form GSTR-2A.
Despite this, ITC (input tax credit) was claimed in relation to such supplies by the recipients in Form GSTR-3B. During Scrutiny/Audit/Investigation, Tax Officers found instances where ITC had been claimed in GSTR-3B but was not reflected in GSTR-2A.
To address this issue uniformly, Circular No. 183/15/2022 – Dated: 27/12/2022, was issued for clarification.
According to the circular, if the ITC claimed in GSTR-3B by a registered person in a financial year is less than Rs. 5 lakhs compared to the ITC available in GSTR 2A, the Proper Officer will request the person claiming ITC to produce a certificate from the concerned supplier confirming the supply. The certificate should state that the supplier has indeed supplied to the registered person, and tax for such supply has been paid by the supplier in GSTR-3B.
It is crucial to note that for the FY 2017-18 period, as per section 16(4) of the CGST Act, which stipulates the maximum time period to claim ITC, the benefit of section 16(4) will not be available if the GSTR-3B return is filed after the due date for the month of September 2018 until the date of furnishing the return for March 2019, provided that details of such supply in the supplier’s GSTR-1 form have not been furnished by the due date of GSTR-1 for March 2019.
Additionally, the specified cases outlined in this circular apply to bona fide errors in reporting during FY 2017-18 and 2018-19.
These instructions are applicable only to ongoing scrutiny/audit/investigation for FY 2017-18 and 2018-19. However, they also apply to cases of FY 2017-18 and 2018-19 where adjudication or appeal proceedings are still pending.
Notice responses can be formulated based on the specific circumstances of the cases in question.
Situations of GST ITC Mismatch
Case 1: GSTR-1 form for the relevant tax period has not been submitted by the supplier, but the GSTR-3B form for that tax period has been filed. Consequently, the supply for the relevant tax period is not reflected in the recipient’s GSTR-2A.
Where the Input Tax Credit (ITC) claimed by a registered person in GSTR-3B for a financial year is less than the ITC available in GSTR 2A by more than Rs. 5 lakhs, the proper officer will request the registered person to provide a certificate from a Chartered Accountant (CA) or Cost and Management Accountant (CMA) for the specific supplies. This certificate should pertain to the invoices issued by the supplier. The company has made supplies to the registered person, and the tax has been paid for such supplies in the GSTR-3B return.
The certificate issued by the CA or CMA should not include the Unique Document Identification Number (UDIN). Furthermore, the UDIN issued must be verified by the CA or CMA on the respective websites of the Institute of Chartered Accountants of India (ICAI) or the Institute of Cost Accountants of India.
Case 2: Both GSTR-1 form and GSTR-3B form for the relevant tax period have been filed by the supplier, but a specific supply has not been included in the GSTR-1 form. As a result, this particular supply is not reflected in the recipient’s GSTR-2A.
Where the ITC claimed by a registered person in GSTR-3B for a financial year is less than the ITC available in GSTR 2A by up to Rs. 5 lakhs, the Proper Officer will request the person claiming ITC to produce a certificate from the concerned supplier. This certificate should confirm that the supplier has indeed supplied goods or services to the registered person, and the tax for such supplies has been paid by the supplier in the GSTR-3B form.
It is important to note that for the FY 2017-18 period, as per Section 16(4) of the CGST Act, the maximum time period to claim ITC applies. The benefit of Section 16(4) will not be available if the GSTR-3B return is filed after the due date for the month of September 2018 until the date of furnishing the return for March 2019. This is applicable only if the details of such supplies in the GSTR-1 form have not been furnished until the due date for filing GSTR-1 for the month of March 2019.
Case 3: Both the GSTR-1 form and GSTR-3B form for the relevant tax period have been filed by the supplier, but a specific supply has not been included in the GSTR-1 form. Consequently, this particular supply is not reflected in the recipient’s GSTR-2A.
In a significant ruling, a Single Bench of the Kerala High Court observed that Input Tax Credit (ITC) cannot be denied to a purchaser merely on the ground of non-recording of the transaction in the GSTR-2A Form.
The petitioner, Diya Agencies, claimed input tax credit of Rs.44,51,943.08/- for the Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) has been limited to an excess claim of Rs.1,04,376.05/- as CGST, and the same amount as SGST credit has been denied on the ground that as per the GSTR 2A in respect of invoice supply, the taxpayer is only eligible for input tax amount shown in GSTR 2A.
Read More: No Denial of ITC to Purchaser on Mere Non-Recording of Transaction In GSTR-2A Form: Kerala HC
Further, the Supreme Court in The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited has held, while interpreting the Section 70 of the Karnataka Value Added Tax Act, 2003, that “Merely because the dealer claiming such ITC claims that he is a bona fide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such burden of proof cannot get shifted to the Revenue.”
Case 4: GSTR – 1 form has been filed by the supplier for the tax period, and GSTR-3B has also been filed, but the wrong GSTIN no has been declared in respect of such supply in GSTR-1.
Notably, by the proper officer of the actual recipient, the jurisdictional officer of the registered person whose GSTIN has been mentioned by mistake will be informed that such ITC has been claimed by the recipient by mistake in his GSTR-3B and be disallowed.
But the permission to claim ITC to the actual recipient will not depend on the action taken by the authority of the registered person who has claimed ITC by mistake, and such action will be pursued as an independent action.
In addition, the circular also stated that it may also be noted that the clarifications given hereunder are case-specific and are applicable to the bona fide errors committed in reporting during FY 2017-18 and 2018-19. Further, these guidelines are clarificatory in nature and may be applied as per the actual facts and circumstances of each case and shall not be used in the interpretation of the provisions of the law.
In conclusion, the challenges faced during the initial implementation of the Goods and Services Tax (GST) in 2017-18 and 2018-19 prompted a comprehensive response to address discrepancies in the reconciliation of Form GSTR-2A and GSTR-3B. The identification of issues with Section 16 of the CGST Act underscored the complexities encountered in claiming Input Tax Credit (ITC). The subsequent issuance of Circular No. 183/15/2022 aimed to provide uniformity in addressing the specific challenges faced by taxpayers.
The outlined case studies exemplify the nuanced nature of GST ITC mismatches and the intricate procedures required for resolution. Notably, the emphasis on obtaining certificates from Chartered Accountants or Cost and Management Accountants, coupled with the significance of adhering to specific timelines as per Section 16(4) of the CGST Act, adds a layer of complexity to the process. The legal precedents set by the Kerala High Court and the Supreme Court further underscore the critical need for accuracy and diligence in claiming ITC.
As these guidelines are specific to bona fide errors during the FY 2017-18 and 2018-19, it is imperative for businesses and tax practitioners to navigate the intricacies of each case diligently. The instructions provided in the circular offer a framework for addressing discrepancies while emphasizing their case-specific nature.
In moving forward, businesses and tax authorities alike must continue to adapt and refine their practices in response to the evolving landscape of GST regulations. This necessitates a collaborative effort between stakeholders, a commitment to transparency, and a proactive approach to compliance, ensuring a more robust and streamlined GST ecosystem for the future.
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