Since past two years and more, GST Authorities are denying the credit of input taxes as claimed in GSTR 3B Return based on the comparison of GSTR 3B and GSTR 2A. As per the GST Act, there is no provision which lays down any provision which could deny the ITC based on GSTR 3B and GSTR 2A mismatch. Section 42 states the matching concept of ITC based on GSTR 2 and GSTR 2A and reversal thereon but provision stands extended indefinitely.
Section 16 of the Act provides for the provision of allowance of ITC. Section 17 of the ACT states the provision relating to the restrictions on ITC. Section 42 talks about matching concept of the ITC.
Section 16 of GST Act, 2017 provides for the eligibility and conditions for taking the input tax credit. Section 16(1) reads as follows:-
“16.(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”
From the above referred sub-section, it is clear that entitlement of ITC charged on any supply of goods or services is
a. Subject to such conditions and restrictions as may be prescribed. The conditions have been given in sub-section (2) of Section 16 and restrictions have been given in Section 17.
b. In the manner specified in Section 49. Sub-section (2) to Section 49 states that the ITC as self-assessed in the return shall be credited to this electronic credit ledger in accordance with Section 41.
c. Such goods or services are used or intended to be used in the course or furtherance of business;
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- With respect to conditions specified in sub-section (2) to Section 16, the said sub-section is beginning with a non-obstante clause to the entire Section 16 which means that the same prevails over all other sub-sections in Section 16. The conditions laid down are as under:-
- In possession of tax invoice/debit note/other documents prescribed under Rule 36 of CGST Rules, 2017;
- Received the goods or services or both;
- The amount of tax has actually been paid by the suppliers to the Government.
- Have filed the return under Section 39 of CGST Act, 2017.
- With respect to sub-section 3 of section 16, no depreciation is to be claimed for the tax component claimed under ITC.
- With respect to Section 16(4), one has to claim ITC before the due date of filing of return under section 39 for the month of September following the end of financial year.
Section 17 of the GST Act lays down the list of Goods and Services on which ITC has been restricted. These ITC are not required to be claimed.
By filing the Return under GSTR 3B, all such conditions and restrictions have been duly meet. Matching Principle falls under Section 42 which is reproduced below:-
Section 42 states about the matching concept of ITC which is reproduced below:-
“42. Matching, reversal and reclaim of input tax credit.—
(1) The details of every inward supply furnished by a registered person (hereafter in this section referred to as the ―recipient‖) for a tax period shall, in such manner and within such time as may be prescribed, be matched––
a. with the corresponding details of outward supply furnished by the corresponding registered person (hereafter in this section referred to as the ―supplier‖) in his valid return for the same tax period or any preceding tax period;
b. with the integrated goods and services tax paid undersection 3 of the Customs Tariff Act, 1975 in respect of goods imported by him; and
c. for duplication of claims of input tax credit.
………………………”
Rule 69 prescribes such conditions and restrictions dealt in Section 42 which has been reproduced below:-
“The following details relating to the claim of input tax credit on inward supplies including imports, provisionally allowed under section 41, shall be matched under section 42 after the due date for furnishing the return in FORM GSTR-3-
(a) Goods and Services Tax Identification Number of the supplier;
(b) Goods and Services Tax Identification Number of the recipient;
(c) invoice or debit note number;
(d) invoice or debit note date; and
(e) tax amount:
Provided that where the time limit for furnishing FORM GSTR-1 specified under section 37 and FORM GSTR-2 specified under section 38 has been extended, the date of matching relating to claim of input tax credit shall also be extended accordingly:”
Rule 69 specifically states that the matching of ITC will be done after filing of Return if Form GSTR 3 and further states that in case the due date of filing of return in Form GSTR 2 has been extended, the concept of matching of the input tax credit too stand extended accordingly. Since the return in Form GSTR has been stayed, the matching concept is stayed too.
In short, it can be concluded that ITC claimed in GSTR 3B has been claimed in accordance of law as provided in Section 16 and Section 17 of the ACT. The matching concept of ITC has been specified under Law after filing of GSTR 3 Return. Matching of ITC has to be done with GSTR 2 and GSTR 2A. If GSTR 2 return is extended, matching concept of ITC also stands extended accordingly. Reversing of ITC is provided in law based on mismatch between GSTR 2 and GSTR 2A and not on the basis GSTR 3B and GSTR 2A.
Author Bio
Sir,
What is the logic of mixing Conditions u/s 16(2) with Conditions u/s 16(4). since Section 16(2), CGST Act, 2017 starts with notwithstanding clause meaning thereby that it supersedes sub-section 4 of section 16, based on the following cases;
a). (1989) 74 STC 260 A.C.T.O. v. Laxmi Misthan Bhandar (Raj)
b). Central Bank of India v. State of Kerala (2009) 4 SCC 94 (SC)
c). (2020) 33 J.K.Jain’s GST & VR 9 Synergy Fertichem Pvt. Ltd. v. State of Gujarat & Ors (Guj)
d). Madhav Rao Jivaji Rao Scindia v. Union of India and another (1971) 1 SCC 85(SC)
ITC is a vested property right under Article 300A, Constitution of India per recent judgment in Union of India & Ors. v. Adfert Technologies Pvt. Ltd. (2020) 33 J.K.Jain’s GST & VR 147 (SC). Previously also, ITC/CNVAT Credit was held to be a vested right, which can not be allowed to be lapsed vide case laws─(1999) 106 ELT 3 Eicher Motors Ltd. v. Union of Ind (SC), (2019) 32 J.K.Jain’s GST & VR 267 Siddharth Enterprises v. The Nodal Officer & Ors. (Guj)*
* The review petition filed by the Govt. has been dismissed by the court (2020) 33 J.K.Jain’s GST & VR 160 Nodal Officer & Ors. v. Siddharth Enterprises (Guj)
The Gujarat High court in the case of Jakap Metind Pvt. Ltd. v. Union of India & Ors. (2019) 32 J.K.Jain’s GST & VR 473 (Guj), has held that the Govt. has no legal authority to retain the amount of credit to which the respondent is entitled to and retention of it by the Govt., cannot be sustained, being violative of Article 265 of the Constitution of India. Over and above the Revenue oriented approach of the Govt. would tentamounts to Double taxation and would be against the basic principles of GST, viz., to mitigate cascading effect of taxation.
CA Om Prakash Jain s/o J.K.Jain,Jaipur
9414300730
opjain02@yahoo.co.in