1. The concept of Matching forms the backbone of ITC (Input Tax Credit) under the GST regime. According to this concept, ITC of the recipient for inward supply to be accepted only if the corresponding outward supply of supplier is matched.
2. Section 42 of the CGST Act prescribed the procedure for matching the outwards liability & Input Tax Credit thru filing of GSTR 1, GSTR 2 & GSTR 3. According to this section , the details of every inward supply furnished in GSTR 2 shall be matched with corresponding details of outward supply furnished in GSTR 1 of the corresponding supplier.
2.1 Statutory Provision – Matching, reversal, and reclaim of Input Tax Credit
| Section 42(1) | The details of every inward supply furnished by the recipient for a tax period shall be matched with the followings :
(a) The corresponding details of outward supply furnished by the corresponding supplier in his valid return for the same tax period or any preceding tax period. (b) The IGST paid in respect of goods imported by him; and (c) Duplication of claims of the input tax credit. |
The matching concept as provided in Sec 42 & 43 is suspended in the absence of GSTR 2 & GSTR 3
3. A new section 43 has introduced vide CGST Amendment Act 2018 which is a non-obstante clause and override the provisions as provided in Section 16(2), 37, 38, 39(1) 41, 42 & 43.
3.1 Statutory Provision:-
| Section 43A (1) | Notwithstanding anything contained in section 16(2), section 37, or section 38, every registered person shall in the returns furnished under section 39(1) (GSTR 3B) verify, validate, modify or delete the details of supplies furnished by the suppliers. |
| Section 43A (2) | Notwithstanding anything contained in Section 41, Section 42, or Section 43 the procedure for availing of the input tax credit by the recipient and verification thereof shall be such as may be prescribed. |
| Section 43A begins with a ‘notwithstanding’ clause. This means that provisions of Section 43A will override Section 16(2) of the CGST Act [which states conditions for availing ITC]Section 37 of the CGST Act [which deals with details of outward supplies] Section 38 of CGST Act [which deals with details of inward supplies]. | |
3.2 Procedure for furnishing return and availing input tax credit: Section 43A prescribed the procedure for furnishing Return & availing Input Tax Credit (ITC).
3.2.1 Statutory Provisions :
| Section 43A (3) | The procedure for furnishing the details of outward supplies by the supplier on the common portal (GSTR 1) for the purposes of availing input tax credit by the recipient shall be such as may be prescribed. |
| Section 43A (5) | The amount of tax specified in the outward supplies for which the details have been furnished by the supplier in GSTR 1 under section 43A(3) shall be deemed to be the tax payable by him under the provisions of the Act. |
| Section 43A (4) | The procedure for availing Input Tax Credit (ITC) in respect of outward supplies not furnished in GSTR 1 shall be such as may be prescribed and such procedure may include the maximum amount of the ITC which can be so availed, not exceeding twenty percent of the input tax credit available, on the basis of details furnished by the suppliers under the said sub-section. |
3.3 Liability to pay tax for Non-Compliances Section 43A (6)
| The supplier and the recipient of supply shall be jointly and severally liable to pay tax or to pay the input tax credit availed in relation to outward supplies for which the details have been furnished in GSTR 1 but return thereof has not been furnished. | |
| Section 43A (7) | The recovery shall be made in such manner as may be prescribed and such procedure may provide for non-recovery of an amount of tax or input tax credit wrongly availed. However, if the amount involved does not exceed INR 1,000, the recovery proceedings can be waived off |
3.4 The following specific cases have been prescribed vide Sec 43A (8) for which rules will be issued to provide the manner to furnish details of outward supplies:-
| Section 43A (8) | A registered person has defaulted in payment of tax and where such default has continued for more than two months from the due date of payment of such defaulted amount
A registered person can furnish details of outward supplies within six months of taking registration |
4. Rule 36(4) of CGST Rules The procedure for availing maximum amount of Input Tax Credit is prescribed vide Rule 36(4) inserted vide notification 49/2019-CT dated 9th October 2019 . The rule seeks to restrict credit in relation to invoices & debit notes which are not furnished by the suppliers and thus not appearing in GSTR – 2A.
4.1 As per the Rule 36(4), a registered person shall be eligible to avail ITC on unreported invoices and debit notes to the extent of twenty percent of the total eligible credit in respect of invoices and debit notes, the details of which have been uploaded by the Suppliers.
For Example, an assessee has a total input tax credit of Rs. 15000 of which Rs.10000 is reflected in GSTR-2A and Rs. 5000 remains un-reflected, the total input tax credit that can be availed is Rs. 12000 i.e. 10000 + Rs 2000 (20% of Rs. 10000). Thus, an input tax credit of Rs. 3000 out of Rs. 5000 which is not reflected cannot be claimed.
4.2 The government had reduced this capping of 20% by 10% via notification 75/2019 dated 26th December 2019 which was effective from 1/1/2020.
4.3 The Government has issued various notifications, giving effect to relief measures recommended by the Ministry of Finance vide Press Release dated 24th March 2020 in response to the spread of COVID-19. GST Rules 36(4) has also got amended till September 2020 vide Notification No. 30/2020 – Central Tax dated 3.4.2020.
4.4 It has been notified that for the months of February, March, April, May, June, July and August 2020 shall be applied in a cumulative manner and the return in FORM GSTR-3B for the tax period September 2020 shall be furnished with the cumulative adjustment of the input tax credit for the said months.
4.5 A recipient filing GSTR-3B from February 2020 onwards may not be required to thoroughly verify GSTR-2A with his purchase register due to the suspension of rule 36(4) of the CGST Rules till September 2020. The recipient must cumulatively match or reconcile GSTR-2A with what has already been claimed as ITC in the month of September and reversed any excess ITC claimed. A taxpayer need to carefully reconciled GSTR 2A with ITC claimed in September GSTR 3B.
5. Form GSTR 2B: The Government has been taking continuous measures to simplify the process and plug the loopholes in the current structure. Form GSTR 2B is introduced on a pilot basis to strengthen the process of availing Input Tax Credit (ITC) for the taxpayers.
5.1 What is Form GSTR 2B Form GSTR-2B is an auto-generated ITC statement, it will be generated for every recipient as per the data filled by the suppliers in their respective Forms GSTR-1, GSTR-5, and GSTR-6.
5.2 GSTR-2B is a static statement available for each month on the 12th of the succeeding month. E.g.: August 2020 statement available on 12th September 2020. This is auto-drafted Input Tax Credit (ITC) statement generated for every recipient, on the basis of the information furnished by their suppliers, in their respective Form GSTR-1 & 5 and Form GSTR-6 filed by ISD.
5.3 Taxpayers can efficiently perform reconciliation between the data generated in Form GSTR-2B and the books of accounts. With the help of the Matching tool provided in GSTR 2B, the taxpayers can ensure that no credit is taken twice, credit is reversed as per law, and tax on reverse charge basis is correctly paid.
5.4 The form will help the government as well as the assessee in matching the input and output of ITC in forms GSTR 3B, GSTR-1, and GSTR 2A, accordingly.
5.5 It is imperative to note that the law does not provide any legal sanction to facilitate GSTR-2B. The Central Board of Indirect Taxes and Customs (CBIC) have not formally issued any circular or notification for the introduction of GSTR-2B. However, a press release was issued by the Goods and Services Tax Network (GSTN)) on 29 August 2020.
6. It has been recommended to refer GSTR-2B for the month of October 2020 returns for feedback purposes only.
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Author Bio
Madam Kudos. Avery good informative article without much legal jargon. Would be much helpful even to a lay person. Please keep it up. Your efforts would help honest taxpayers to discharge their responsibilities in time and effectively
Regards
JR Kota FCA