Concerns regarding last date by which everything wrongly done under GST can be undone and every thing which is not done can be done, are looming large midst the professionals facing heat at the crest of their tax audit assignments. This is a comparative view of different provisions of the GST law dealing with the subject so that a considered view , even it at cost of being fair and not correct, may be taken.
Legal Provisions of Section 16(4)
A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
1. Disentitlement is for taking of ITC only. ITC taken may have to be reversed and then restored back for various reasons. One such reason can be reversal for non payment with in 180 days u/s 16(2) 2nd proviso read with Rule 37 and restoration on payment under 3rd proviso to S. 16(2). Another instance can be restoration on account of subsequent rectification of declared tax by supplier after being reversed due to passive behavior of supplier u/s 42(7). Further a person may not be taking ITC because of inward supplies not being accounted for or there may also be cases of inward supplies accounted for in books but ITC not claimed in return. In later cases , purchases may be there in GSTR 2A or may not be there in GSTR 2A. If purchases are there in GSTR-2A and still one choses not to claim credit, Table 8 of GSTR-9 takes care of the situation and parks it into ITC to lapse. But if purchases are neither there in GSTR 2A nor ITC claimed in returns, still ITC can not be taken, notwithstanding nothing is reflected in Table 8.
2. Where tax is short paid or not paid by supplier on certain supplies and supplier pays tax u/s 73, for which credit is not blocked by section 17(5)(i), and supplier issues invoice or debit note after the date stated in section 16(4), whether ITC can be taken by the recipient for invoice or debit note issued after 20th October of next financial year ? We check both “invoice” and “debit note” with reference to section 16(4). While if debit note is issued in relation to an invoice for earlier financial year, taking of credit appears to be a definite taboo. But if the invoice is issued in subsequent financial year, then it pertains to that financial year and section 12(5) and 13(5) may also support for extending the time of supply to the date of filing of return or payment of tax. Another view that invoice “pertains to” earlier financial year may also hold ground but debit notes relating to invoices of earlier year shall definitely come under scanner of tax authorities.
3. Section 38(2) requires inclusion of inwards supplies on which IGST is payable u/s 3 of Customs Tariff Act i.e. import of goods in GSTR-2. Any rectification of error of commission or omission can be done in GSTR-2 till date of furnishing return u/s 39, which is not possible due to suspension of GSTR-2. Further it is pertinent to note that Section 16(4) places embargo only in respect of invoices and debit notes and not in respect of other tax paying documents mentioned in S. 16(2)(a) read with Rule 36(1)(d) like Bill of Entry for import of goods. Hence expressly, there is no bar u/s 16(4) for taking ITC on the basis of bill of entry after 20th But table 8 of GSTR-9 places restriction on taking credits not only after 20th October but after 1st April itself. Perhaps the law makers in their wisdom considered that there can never be delay in taking ITC on bill of entry and credit shall be taken with in financial year only, losing sight of even section 16(2)(b), where ITC has to taken only on receipt of goods which may be at later point of time crossing the boundaries of 31st March, where bill of entry is prepared much earlier.
4. Another moot question arises that GSTR 3B emanating from Rule 61(5) can whether be considered return u/s 39. GSTR 3B is required to be filed only when date of filing GSTR-1 and GSTR-2 is extended. This situation has not been provided in section 39. Hence there exists a view that GSTR 3B is not a return u/s 39. This view is further fortified by the facts that while in originally introduced Rule 61(5) vide Notification 10/2017 dated 28-06-2017, GSTR 3B was mentioned to be “in lieu of GSTR-3” the subsequent notification 17/2017 dated 27-07-2017 substituting Rule 61(5) has done away with the words “ in lieu of GSTR-3”. Hence there is a view that actual date of filing of GSTR-9 shall be the last date of taking of credit for financial year 2017-18 and not 20th October 2018 for the simple reason that GSTR 3B is not the return u/s 39.
|34(2)||Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:|
1. Section 34(2) requires to declare the details of credit note in the return for the month during which credit note has been issued but not later than September. The words used are not “ later than return for the month of September” but “September” simplicitor. Hence for reducing output tax liability on the basis of credit note September is the last date and not due date of return u/s 39 for the month of September, hence as per provisions of section 34(2), the benefit of credit note can not be taken after 30th
2. Another issue arises that Table 9B of GSTR-1 requires to furnish details of credit notes in case of
However no details of credit note are required to be furnished in case of Table 7 where in summary supplies are furnished net of credit notes in respect of:
i. Intra state supplies to unregistered persons
ii. Inter state supplies to unregistered persons up to Rs. 2.5 lacs.
Hence section 34(2) does not place embargo on availing benefit of credit note after September.
3. Further section 34(2) requires to furnish the details of credit note in the return. However, credit notes are depicted in GSTR-1 which is only a statement of outward supplies and not a return. Seemingly innocuous in consistency warrants attention of both taxpayers and tax authorities.
|37(3) Proviso||Any registered person, who has furnished the details under sub-section (1) for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify such error or omission in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period:
Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier.
|38(5) Proviso||Any registered person, who has furnished the details under sub-section (2) for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify such error or omission in the tax period during which such error or omission is noticed in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period:
Provided that no rectification of error or omission in respect of the details furnished under sub-section (2) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier
1. Section 37(3) and 38(5) are similarly worded barring a few exceptions, discussed here in , hence being commented collectively.
2. Both section 37(3) and 38(5) declare that date of furnishing of return u/s 39 for the month of September is the final date to carry out any rectification of error of commission or omission. Here due date of return u/s 39 for the month of September , unlike section 16(4) and 39(9) has no relevance. Hence actual filing date of GSTR-1 and GSTR-2 shall determine the last date to carry out any amendment . Since GSTR-2 is not operative, the outward supplies can be rectified at any time before the actual date of filing of GSTR-1 or annual return, which ever is earlier.
3. Further although as per section 39(9) due date for the month of September is the last date to carry out amendment but section 39(9) is subject to section 37, hence rectification in Table 9A or 9C or Table 10 or Table 11 can be carried out till the actual date of filing of GSTR-1 or GSTR-9, which ever is earlier.
4. GSTR-1 and GSTR-2 do not make rectification of error of omission or commission otiose for the reason of discovery by way of scrutiny, audit, inspection or enforcement activity by the tax authorities, unlike section 39(9) and further since section 39(9) is subject to section 37, an error discovered as a result of scrutiny, audit, inspection or enforcement activity may be corrected till date of filing of GSTR-1 for September.
5. Further while section 37(3) requires rectification in the month of discovery through GSTR-1, section 38(5) requires rectification in the month of notice in prescribed manner i.e. notice vide GST MIS-1. However GST MIS-1 is not yet operative.
6. Section 37 and 38 further states that no rectification shall be done after date of furnishing return u/s 39 for the month of September. Small tax payers having turnover lesser than 1.5 crores are required to file return not for month of September but for quarter ending month of September. It may also be pertinent to note that section 39(9) specifically permits rectification till filing of return for 2nd Quarter, which is absent in section 37. Hence a moot question arises whether small taxpayers having turnover lesser than 1.5 crore and opting for quarterly filing are not bound by the time limit for rectification?
|39(9) Proviso||Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed, subject to payment of interest under this Act:
Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year, or the actual date of furnishing of relevant annual return, whichever is earlier.
1. While section 37(3) and 38(5) conceive rectification of “error or omission”, section 39(9) seeks rectification of “omission or incorrect particulars”. While all three section seek rectification of “omission”, section 37(3) and 38(5) seek rectification of “error”, while section 39(9) seeks rectification of “incorrect particulars”. The difference between “error” and “incorrect particulars” lies in the intent. While error may be only an inadvertent depiction in a statement, furnishing of incorrect particulars may be supported by designs to conceal. Hence 39(9) in that sense appears to broaden the scope of rectification. Hence except upon discovery by scrutiny , audit, inspection or enforcement activity, the incorrect particulars, incorrect particulars can be rectified. The view is supported by use of words “error” and “incorrect” at other places in the Act. The words “incorrect” is used in section 122 for penalty but error has been used in section 161 to indicate mistakes which are not supported by designs to conceal. Hence “incorrect particulars” may be egregious as compared to “errors”
2. Further section 39(9) requires rectification till due date of return for month of September or second quarter and not till actual date of furnishing return for September , unlike section 37 and 38.
3. Another issue arises that where error is discovered in say scrutiny by issuing ASMT-10 u/s 61 , whether error can be rectified in subsequent return GSTR 3B. The answer lies in scvanging the law about another issue “whether GSTR 3B is a return”. Because if it is return then rectification after scrutiny is not possible and if it is not a return then subsequent rectification in GSTR-3B is not prohibited by section 39(9).
Section 2(97) defines return as “prescribed or otherwise required to be furnished by or under this Act or rules made there under”. As discussed above GSTR-3B is emanating from Rule 61(5) and not S. 39. Hence GSTR-3B is a return prescribed under Rules and not a return prescribed under the Act. Another pertinent question arises that whether rule can prescribe some thing not emanating from the Act. In this regard provision of section 164 may be analysed. While section 164(1) only permits rules “for carrying out provisions of this Act”. Section 164(2) permits, making of rules for any of the matters :
i. Which by this Act are Required to be or may be prescribed or
ii. In respect of which provisions are to be or mat be made by rules
Hence section 164(2) permits making of Rule 61(5) and hence GSTR 3B is a return. Hence no rectification of mistake is possible in GSTR 3B after discovery by scrutiny subject , of course to section 37 i.e. errors relating to outward supplies. It means that errors relating to ITC can not be rectified after discovery by scrutiny, because section 38 remains suspended.
4. A still deeper scrutiny of section 39(9) reveals that it comes into operation only if return is filed u/s 39(1) i.e. GSTR 3. Since GSTR-3, remains suspended, another issue arises, whether any such rectification u/s 39(9) is possible, in present circumstances. Since GSTR-3B is not a return u/s 39 and furnishing is required u/s 61(5), section 39(9) may not come into operation at all for GSTR 3B. In such a situation one may refer to Circular 26/26/2017 dated 29-12-2017, which deals with errors in GSTR-3B. Interestingly this circular also does not refer to 39(9) which further fortifies that GSTR 3B is not a return u/s 39. Attention in this regard is invited towards para 4 of Circular which says:
“It is clarified that as return in FORM GSTR-3B do not contain provisions for reporting of differential figures for past month(s), the said figures may be reported on net basis alongwith the values for current month itself in appropriate tables i.e. Table No. 3.1, 3.2, 4 and 5, as the case may be. It may be noted that while making adjustment in the output tax liability or input tax credit, there can be no negative entries in the FORM GSTR-3B. The amount remaining for adjustment, if any, may be adjusted in the return(s) in FORM GSTR-3B of subsequent month(s) and, in cases where such adjustment is not feasible, refund may be claimed. Where adjustments have been made in FORM GSTR-3B of multiple months, corresponding adjustments in FORM GSTR-1 should also preferably be made in the corresponding months”
This circular futher requires to take following actions for amendment in following situations where GSTR 3B has already been filed:
|Liability was under reported
|Company A has four units in Haryana, while filing their return for the month of July, they inadvertently, missed on details of a last minute order. The Company had filed their returns in order to not pay late fee and other penalties. What can they do?
In this case, they may report this additional liability in the return of next month and pay tax with interest.
If such liability was not reported in FORM GSTR-1 of the month/quarter, then such liability may be declared in the subsequent month’s/quarter’s FORM GSTR-1 in which payment was made.
|Liability was over reported
|Company B had reported an inter-State sale but realized that the same sale was counted twice and hence was not to be reported or taxed. But the return form was already filed and no change could be done to reduce the liabilities. What can company B do?
In this case, they may reduce this liability in the return of subsequent months or claim refund of the same.
Where the liability was over reported in the month’s / quarter’s FORM GSTR-1 also, then such liability may be amended through amendments under Table 9 of FORM GSTR-1
|Liability was wrongly reported
|Company C was registered in the State of Haryana. While entering their outward supplies in FORM GSTR-3B, the company realized that they had inadvertently, shown inter-State supply as intra-State supply and submitted the return. The company paid their wrong liability and filed their return in order to avoid late fee and penalty? What can they do?
Since, the return has already been filed, then the company will have to report the inter-State supply in their next month‟s liability and adjust their wrongly paid intra-State liability in the subsequent months returns or claim refund of the same.
Such taxpayers will have to file for amendments by filling Table 9 of the subsequent month’s / quarter’s FORM GSTR-1.
|Input tax credit was under reported
|Company D, while filing their FORM GSTR – 3B for the month of July, inadvertently, misreported Input tax credit of Rs. 1,00,00,000/- as Rs. 10,00,000/-. They had filed their return and paid Rs. 90,00,000/- in cash. What can they do?
Since, the return has already been filed, Company D may add such Input tax credit in their return for subsequent month(s).
|Input tax credit was over reported
|While filing their FORM GSTR 3B for the months of July, 2017, Company E inadvertently, reported their eligible input tax credit, as Rs. 20,00,000/- instead of Rs. 10,00,000/-. Company E also utilized their additional input tax credit and filed their returns. What can they do?
Since, the company had utilized ineligible credit to offset such liabilities, the company will have to pay (through cash) / Reverse such over reported utilized input tax credit with interest.
Note: Circular 26/26/2017 does not restrict making amendments till due date of return for month of September or furnishing of annual return, which ever is earlier. Hence it appears that subject to provisions of section 16(4) barring taking of ITC, other amendments can be made.
|52(6) Proviso||If any operator after furnishing a statement under sub-section (4) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the month during which such omission or incorrect particulars are noticed, subject to payment of interest, as specified in sub-section (1) of section 50:
Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of statement for the month of September following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.
1. Last date for carrying rectification is the due date of filing of GSTR-8 and not return u/s 39.
2. No rectification can be done after discovery in scrutiny, audit, inspection or enforcement activity.
Right to make amendments in return is a serious affair and mere nitties and grities of law should not impinge this important right of taxpayer. Author feels that government should clarify the issues and concerns raised in this Article.