GST Update No 349 on Circular regarding differences in input tax credit in GSTR-3B and GSTR-2A

The discussion as regards to difference in input tax credit as available in GSTR-2A and as claimed in GSTR-3B during the initial phase of implementation of GST i.e. pertaining to Financial Years 2017-18 and 2018-19 has been a matter of discussion since long. The tax authorities time and again issue notices demanding explanations from the taxpayers for such discrepancies and for reversal of such ineligible input tax credit. To put an end to all these disputes and streamline the process, this issue is acknowledged by CBIC vide Circular No. 183/15/2022-GST dated 27.12.2022. The detailed analysis of this is subject matter of our present update.

It is widely known that Form GSTR-2A was not available with the taxpayers on the common portal during the initial phase of GST. Also, the restriction as regards to availment of input tax credit as per GSTR-2A were effective from 09.10.2019 only. However, the availment of input tax credit was subject to fulfilment of conditions as mentioned under Section 16 of CGST Act, 2017 w.e.f. 01.07.2017. The CBIC to bring uniformity and for the purpose of clarification, bifurcated the situation in 4 categorise which are as follows:

1. The supplier failed to file GSTR-1 for a tax period and has filed GSTR-3B because of which supplies were not reflected in GSTR-2A of the recipient.

2. The supplier has filed GSTR-1 as well as GSTR-3B for the tax period but has failed to report a supply in GSTR-1 because of which the same was not reflected in GSTR-2A as well.

3. The supplies made to the registered person and invoice issued as per Rule 46 of CGST Rules containing GSTIN of the recipient but the said supply was wrongly reported as B2C instead of B2B. Resultantly, the supply was not reflected in GSTR-2A of the recipient.

4. The supplier has filed GSTR-1 and GSTR-3B for the tax period but has declared the supply with wrong GSTIN of the recipient in GSTR-1. In this case, the proper officer of the actual recipient shall intimate the concerned jurisdictional officer of the assessee whose GSTIN was wrongly mentioned that the ITC in the said case is to be disallowed in case it is claimed in GSTR-3B. However, the allowance of ITC to actual recipient shall not be dependent on completion of this procedure by the tax authority.

In all of the above cases, it is clarified that the proper officer shall seek the details of invoices from the registered person and ascertain fulfilment of conditions as per Section 16 of CGST Act, 2017. Further, the proper officer shall also check any reversal of input tax credit as per Section 17 and 18 of CGST Act, 2017.

In alignment with the above, in case any discrepancy is noticed between ITC claimed in GSTR-3B and as per GSTR-2A, for the said Financial Year exceeding Rs. 5 Lakhs, the proper officer shall demand a certificate for the said supplier from the CA/CMA certifying that the supplies are actually made by the supplier to the registered person and tax on the same is paid by the said supplier in GSTR-3B. The certificate shall contain UDIN as well. However, in case the difference between GSTR-3B and GSTR-2A is upto Rs. 5Lakhs for the Financial Year, the proper officer shall ask the claimant to produce a certificate of the supplier t the effect that supplies are actually made and tax is paid thereon.

However, it is clarified that for the FY 2017-18, as per the proviso to Section 16(4) of CGST Act, 2017, the aforesaid relaxation shall not be applicable to the claim of ITC made in GSTR-3B filed after the due date of furnishing return for the month of September, 2018. The above clarification, however, remains applicable in case of bonafide errors during FY 2017-18 and 2018-19. The instructions shall remain applicable only to ongoing investigation/scrutiny/audit and not on completed ones.

The circulars like above are what is expected from the Government’s end at the earliest to put a full stop on all kinds of discussions and debates. It is pertinent to note here that the CBIC has issued this Circular in line with Internal Circular No. 02A of 2022 dated 25.02.2022 released by Maharashtra Government. This is done to streamline the entire process, bring uniformity and avoid any further litigations on the subject matter.

But the relaxation from the time limit to file the return is not given in this case. Government has come with the scheme to file return belatedly for small taxpayers and waived the late fee for them. Hence, all these taxpayers have filed return late under the Government scheme. But now denial of credit to buyers of these taxpayers will again lead to complex situation for these suppliers. The buyers will not pay the GST amount to them or ask them to repay the same if already paid to them. When these taxpayers have acted on advice of Government and filed the return late with reduced late fees then denial of credit to their buyers means that Government is acting against them. When the tax has been paid to Government exchequer then the credit should be allowed to their buyers in these initial stage of implementation of GST.

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GST Update No 349 on Circular regarding differences in input tax credit in GSTR-3B and GSTR-2A

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