Recently, the IDTC of ICAI has issued formats in the “Guide to CA Certificates in GST,” and it obviously includes this one too.
From the day Circular No. 183/15/2022-GST dated 27th December 2022 was issued, concerns revolve around the validity of this circular. This is not only because it is baseless with reference to the CGST Act but also because the validity of 2A and the doctrine of impossibility u/s 16(2)(c) itself is under larger disputes until 31.12.2021. Added to this are the complexities around the certificate when issued by CA/CMA for a tax amount exceeding INR 5 lakhs.
First, let’s understand that what appears to be (just) a certificate can only be an outcome of a thorough audit procedure. A simple doubt that one can raise is, what is the assurance that the taxpayer has not reversed the liability, even though it has been discharged in the first instance? So, unless a professional is continuously reviewing the monthly and annual compliances of the taxpayer, not only for the relevant FY but also for preceding and succeeding FYs, it is practically next to impossible to certify that the taxes are duly discharged.
1. The CA certificate should only be issued for the specific mismatch categories outlined in paragraph 3 of the Circular:
i. When the Supplier hasn’t filed FORM GSTR-1 but has filed FORM GSTR-3B.
ii. When outward supplies have been omitted from FORM GSTR-1, and FORM GSTR-3B has been filed.
iii. When outward supplies have been incorrectly reported as ‘B2C’ supply in FORM GSTR-1 instead of ‘B2B’ supply, and FORM GSTR-3B has been filed.
iv. When outward supplies have been reported with ‘incorrect GSTIN’ under the ‘B2B’ category in FORM GSTR-1, and FORM GSTR-3B has been filed.
2. According to the Circular, a Chartered Accountant should issue the certificate when the amount of mismatched input tax credit exceeds Rs. 5 lakh. This limit is either Rs. 5 lakh for IGST mismatch or Rs. 2.5 lakh each for CGST and SGST/UTGST mismatch.
3. Since invoice-wise details are unavailable in the return filed in FORM GSTR-3B, it’s essential to verify the following:
i. Tax invoices
ii. Books and records
iii. Annual Return in FORM GSTR-9
iv. Reconciliation Statement in FORM GSTR-9C
This confirmation is crucial to ensure the Supplier’s assertion is reliable. Payments made only through returns in FORM GSTR-3B are relevant for this certificate, while payments made via FORM GST DRC-03 or any other recovery method fall outside the certificate’s scope.
3. Verification should encompass multiple tax periods to ensure that the output tax discharged in subsequent tax periods doesn’t relate to other liabilities.
4. The verification process should commence with the total mismatch reported by the Recipient, as directed by the Proper Officer. It’s important to exclude scenarios outside the Circular’s scope to determine the extent of the mismatch for certification. These exclusions include:
a) Mismatches discharged through methods other than FORM GSTR-3B, such as FORM GST DRC-03 or FORM DRC-13.
b) Mismatches resolved without being discharged via FORM GSTR-3B, such as credit notes or return supplies.
5. It’s crucial to pay attention to:
a) The tax period concerning the date of issue of the tax invoice.
b) The tax period in which outward supply is reported in FORM GSTR-1.
c) The tax period in which output tax is discharged in FORM GSTR-3B.
d) Consolidated data reported in FORM GSTR-1 and FORM GSTR-3B, along with the annualized and final versions filed in the annual return in FORM GSTR-9.
e) Recognize that mismatches may extend beyond the four categories discussed in this Circular.
The obvious next question for any professional would be, “whether fees can be commensurate to the professional work involved?”. When all that the taxpayer can get in return is, just a satisfied customer (who was already dissatisfied with 2A non reflection) and helping them to save from prolonged tax disputes!
Another interesting issue could be, if a CA has issued certificate on behalf of the supplier for ITC mismatch, can the same CA represent the matter in the tribunal challenging Sec 16(2)(c) on behalf of the recipient for the mismatch without certificate?
Nevertheless, a circular is afterall at the discretion of the taxpayer to follow and usually found favourable atleast to settle smaller disputes! But, the complications are many and a professional should thoroughly evaluate on a case-by-case basis and decide diligently before even a commitment to issue certification.
Certificate for Input Tax Credit Mismatch under GST
Independent Practitioner’s Certificate in respect of credit mismatch as required by CBIC Circular No. 183/15/2022-GST dated 27th December 2022 and Circular No. 193/05/2023-GST dated 17th July 2023.
Name and Address of the Applicant
1. This Certificate is issued in accordance with the terms of our agreement dated …………….
2. M/s ……………………………………………………………………………. (hereinafter referred as “Supplier”) is having GSTIN …………………….. (Registration with effect from ………………………………………………….. ) and is having principal place of business at ……………………………… and Supplier has following additional places of business:
3. M/s ……………………………………. (hereinafter referred as “Recipient”) is having GSTIN ………………………………………….. (Registration with effect from ………………………………………………….. ) and is having principal place of business at ……………………………………………….
Supplier has following additional places of business:
4. ………………………. Central Board of Indirect Taxes & Customs (‘CBIC’) has issued Circular No. 183/15/2022-GST dated 27th December 2022 (hereinafter referred to as “Circular”) & Circular No. 193/05/2023-GST dated 17th July 2023, in case of mismatch of bona fide eligible input tax credit of a Recipient with respect to the invoices issued by the Supplier (hereinafter referred to as “mismatched invoices”) that cannot be validated through the mechanism of FORM GSTR- 2A report for the period ____________________ [i.e., the supplier has omitted or failed to furnish the correct details of outward supplies in their FORM GSTR-1, which has led to certain deficiencies or discrepancies in FORM GSTR-2A of their Recipient].
Guide to CA Certificates in GST
Para 4.1 and 4.1.1. of Circular requires that in order to verify the condition of clause (c) of sub-Section (2) of Section 16 of CGST Act that tax on the said supply has been paid by the Supplier in cases, where difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a Supplier for the said financial year exceeds Rs. 5 lakh, the proper officer shall ask the registered person to produce a certificate for the concerned Supplier from the Chartered Accountant (CA) or the Cost Accountant (CMA), certifying that supplies in respect of the said invoices of Supplier have actually been made by the Supplier to the said registered person and the tax on such supplies has been paid by the said Supplier in his return in FORM GSTR 3B.
Responsibility of Management of the Supplier
5. Management of the Supplier is responsible for preparation, maintenance and submission of records in relation to requirements for verification and validation that due tax has been paid on the supplies covered by the mismatched invoice satisfying the condition as provided under Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 (in short “CGST Act”).
6. It is the responsibility of the Management of the Supplier to ascertain fulfilment of the following conditions of Section 16 of CGST Act in respect of the input tax credit availed by them and utilised for discharging output liability:
i) They are in possession of a tax invoice or debit note issued by the Supplier or such other tax paying documents;
ii) They have received the goods or services or both;
iii) They have made payment for the amount towards the value of supply, along with tax payable thereon, to the registered person who has supplied goods or services or both to the Supplier;
iv) The registered person who has supplied goods or services or both to the Supplier, has have paid due tax on the outward supply by way of cash or admissible input tax credit in respect of the said supply;
v) Appropriate reversal of input tax credit has been made in accordance with Section 17 or Section 18 of CGST Act.
Certificate for Credit Mismatch
7. Management of the Supplier is responsible to ensure that books, records documents and information made available for purposes of verification are truthful and reliable, extracted from contemporaneous records for the purposes of establishing reliability of assertions made by them.
8. Pursuant to requirements of Circular, our responsibility is to verify and validate that tax in respect of the supplies covered by the mismatched invoices, has been paid by the Supplier in his return in FORM GSTR 3B as the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the Recipient in respect of the said Supplier for the said financial year exceeds Rs 5 lakh.
9. All details which are required to be furnished in the certificate have been provided by the Management (of the Supplier) to us. The authorship of underlying data based on which the present certificate has been issued, will not be ours but will always be with them (Management of the Supplier).
Our exercise is to review and verify the books of account, tax invoices, returns and other records of the Supplier and not that of the Recipient who has availed the input tax credit. Considering that we are carrying out the exercise of verification and validation of discharge of output tax by the Supplier, the scope of our responsibility is not to examine or opine on the admissibility of input tax credit in the hands of the Recipient.
The present certificate is limited to statement of fact and is not an opinion about the admissibility of input tax credit. The certificate traces the flow of tax invoice(s) under review into the data in Common Portal and related taxes discharged via FORM GSTR-3B returns filed in one or other tax period.
10. Provision of Section 16(2)(c) of the CGST Act requires that the tax charged in respect of supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply.
However, given the inherent limitation which arises out of non-availability of reliable mechanism either by the Common Portal or by the Government, pertaining to tax being deposited in respect of the credit being availed and utilised by the Supplier for discharge of outward liability on the supplies covered by the mismatched invoices, we have relied upon the data to the extent available by the Common Portal and the information and documents made available by the Management of the Supplier for verification of stipulation as provided under Section 16(2)(c) of the CGST Act.
11. We have conducted our examination in accordance with the Guidance Note on Reports or Certificates for Special Purposes (Revised 2016) issued by the Institute of Chartered Accountants of India. The Guidance Note requires that we comply with the ethical requirements of the Code of Ethics issued by the Institute of Chartered Accountants of India.
We have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements.
12. The present certificate is limited to statement of fact and is not an opinion about the admissibility of input tax credit to the Recipient. The certificate traces the flow of tax invoice(s) under review into the data in Common Portal and related taxes discharged via FORM GSTR-3B returns in one or other tax period filed.
13. Based on our examination as above and the information and explanations given to us, in our opinion, amount of Rs. ___________ being CGST, SGST/ UTGST, IGST and Cess in respect of the supplies covered by the mismatched invoices, have been deposited by the Supplier via FORM GSTR 3B returns filed under section 39 of CGST Act. The details are given below:
DATE OF DELI-VERY (ONLY IN CASE OF GOODS)
LOCATION OF DELIVERY (ONLY IN CASE OF GOODS)
Certificate for Credit Mismatch
14. This certificate is issued for the purposes of verification of compliance of requirements in Section 16(2)(c) of CGST Act that the tax has been paid by the Supplier in respect of the supplies covered by the mismatched invoices, as required by the Proper Officer of above named Recipient for financial year ………………………../………………….. as required under Circular No. 183/15/2022-GST dated 27th December 2022 issued by CBIC . This certificate should not be used by any other person or for any other purpose. Accordingly, we do not accept or assume any liability or duty of care for any other purpose or to any other person to whom this certificate is shown or into whose hands it may come without our prior consent in writing.
For XYZ and Co.
Firm’s Registration Number
Place of Signature:
(Name of the Member Signing the Certificate)