GSTR-3B is not a “Return” : Gujarat High Court

On 24^th June 2019 the Hon’ble Gujarat High Court has given a landmark ruling in the case of AAP & Company, Chartered Accountants v/s Union of India that the FORM GSTR-3B is not a ‘Return’, rather Return specified for Section 39 in FORM GSTR-3 is a ‘Return’. This judgement is a milestone in the short history of a couple of years of GST Regime in India as it would have wide spread implications. There have been a lot of deliberations whether GSTR-3B is a “return” or not but it was never settled but this judgement is being seen as a big turnaround.

The Ruling has been given in the light of Section 16(4) & Section 39 of CGST Act 2017. The contention in this case was that that GSTR-3B is not a return under Section 39 of the CGST Act 2017, 2017 and hence its due date cannot be considered for Section 16(4) of the CGST Act 2017, 2017 and hence the due date for filing the annual return of 2017-18 should be the last date for taking input tax credit for the F.Y. 2017-18.

Petitioner’s Contention

The reason for the petitioner was contending was that on 18th October 2018 a Press Release was issued by CBIC where among clarifications one of the important clarifications given was that the last date of claiming GST for any ITC pertaining to the Financial Year 2017-18 is the filing of due date of GSTR-3B for September 2018. This created a huge confusion that whether the GSTR-3B is a Return prescribed under Section 39 of CGST Act 2017 i.e. GSTR3 or GSTR-3B is the substitute of GSTR-3.

GST Authorities’ Contention

1. As per the provisions of Section 16(4) of the CGST Act the last date to avail ITC for the invoices of a particular financial year would be the due date of filing of return under Section 39 of the CGST Act or Annual Return, whichever is earlier.

2. As per Section 39 of the CGST Act, no specific name has been given to the return to be filed under this Section. The only condition mentioned is that the return should contain the details of (i) inward and outward supplies of goods/ services/ both (ii) ITC availed (iii) tax payable and tax paid.

3. Form GSTR-3B contains all the details required under Section 39 of the CGST Act i.e. (i) inward and outward supplies of goods/ services/ both (ii) ITC availed (iii) tax payable and tax paid. Hence, Form GSTR-3B is the return to be filed under Section 39 of the CGST Act.

4. The furnishing of outward details in Form GSTR-1 by the corresponding supplier(s) and the facility to view the same Form GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of a Registered Taxpayer to avail ITC on self-assessment basis in consonance with the provisions of section 16 of the Act.

5. Vide Order No. 02/2018 – Central Tax dated 31 December 2018, the last date for availing ITC has been further extended till the due date of furnishing of the return for the month of March 2019, subject to specified conditions.

High Court’s Observations

1. The Press Release dated 18 October 2018 would be valid and in consonance with Section 16(4) of the CGST Act, only if Form GSTR-3B is a return required to be filed under Section 39 of the CGST Act.

2. Filing of returns in Form GSTR-2 and Form GSTR-3 were kept in abeyance due to technical glitches in the GSTN portal and difficulty faced by the taxpayers.

3. Form GSTR-3B was a shorter return order introduced for the initial period.  It was not introduced as a return in lieu of return required to be filed in Form GSTR-3; it was only a temporary stop gap arrangement till the due date of filing the return in Form GSTR-3 is notified.

4. The CBIC has been issuing notifications from time to time extending the due date of filing of the return in Form GSTR-3, i.e. return required to be filed under Section 39 of the CGST Act. The latest Notification No.44/2018– Central Tax dated 10 September 2018 states that the due date of filing the return under Section 39 of the Act, for the months of July 2017 to March 2019 shall be subsequently notified in the Official Gazette.

5. The CBIC vide Notification No.17/2017 – Central Tax dated 27 July 2017 has consciously amended the Notification no.10/2017 – Central Tax dated 28 June 2017 retrospectively to replace ‘Return in Form GSTR-3B being in lieu of Form GSTR3’with ‘Form GSTR-3B being in lieu of Form GSTR-3’.

The Judgement

Form GSTR-3B is not the monthly return contemplated under the provisions of Section 39 of the CGST Act and the Para 3 of the Press Release dated 18 October 2018 is contrary to the provisions of Section 16(4) read with Section 39(1) of the CGST Act in turn read with Rule 61 of the CGST Rules.

Analysis of the Judgement 

In this case there was a big question whether GSTR-3B is a “return” or not and the answer to this would decide the consequences in either case i.e. what would happen if GSTR-3B is a return and what would happen if GSTR-3B is a not a return. If GSTR-3B is a return then there would the Status Quo but if GSTR-3B is a not return, then whatever Interest & late fee have been charged late payment of tax & late filing of GSTR-3B would have to be reversed. Not only this there are so many things which would get reversed if GSTR-3B is not a return.

Now let’s quickly try to understand this judgement and if it remains to be the final say what can be the outcome of this. To understand we have to go into the Section 16(4), Section 39 & Rule 61 of the CGST Act 2017.

The Section 16(4) of CGST Act 2017 prescribes that the date to claim Input Tax Credit (ITC) for any financial year would be:

1. the due date of filing of return under section 39 in “FORM GSTR-3” for the month of the month of September of the succeeding year

2. filing of the annual return for the relevant year whichever is earlier else such ITC would be lapsed forever.

Now let’s see what does Rule 61 of the CGST Act 2017 states that prescribes the returns to be filed under section 39. Clause 5 of Rule 61 states Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38 has been extended and the circumstances so warrant, the Commissioner may, by notification, specify the manner and conditions subject to which the return shall be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.  

Further Clause 6 of Rule 61 states Where a return in FORM GSTR-3B has been furnished, after the due date for furnishing of details in FORM GSTR-2:

(a) Part A of the return in FORM GSTR-3 shall be electronically generated on the basis of information furnished through FORM GSTR-1, FORM GSTR-2 and based on other liabilities of preceding tax periods and PART B of the said return shall be electronically generated on the basis of the return in FORM GSTR-3B furnished in respect of the tax period;

(b) the registered person shall modify Part B of the return in FORM GSTR-3 based on the discrepancies, if any, between the return in FORM GSTR-3B and the return in FORM GSTR-3 and discharge his tax and other liabilities, if any;

(c) where the amount of input tax credit in FORM GSTR-3 exceeds the amount of input tax credit in terms of FORM GSTR-3B, the additional amount shall be credited to the electronic credit ledger of the registered person.

If we care fully read the above given clauses Rule 61 itself prescribes that FORM GSTR-3 shall be electronically generated on the basis of information furnished through FORM GSTR-1; it means that law itself saying that Form GSTR-3B is not the substitute of Form GSTR3. Further its stated that PART B of the said return shall be electronically generated on the basis of the return in FORM GSTR-3B. So, its crystal clear that Form GSTR-3B is a part of the Form GSTR3.

Further the sub clause (b) of Rule 6 states that Part B of the return in FORM GSTR-3 based on the discrepancies, if any, between the return in FORM GSTR-3B and the return in FORM GSTR-3 and discharge his tax and other liabilities, if any. By the language of this sub clause the impression comes that the Form GSTR-3B filed was just a Provision Return which was subject to the finalisation by filing Form GSTR3 by rectifying any discrepancy and paying corresponding tax etc.

Now the most important thing, Sub Clause (c) of Rule 61 which states that where the amount of input tax credit in FORM GSTR-3 exceeds the amount of input tax credit in terms of FORM GSTR-3B, the additional amount shall be credited to the electronic credit ledger of the registered person This clause clearly says that if the taxpayer has claimed a lesser amount in GSTR-3B than the amount of ITC as per the Form GSTR-3, then the difference would be credited to the electronic credit ledger. Here the law itself states that Form GSTR-3B is not the final statement/return to claim ITC and the eligibility to claim ITC is governed by Form GSTR-3.   

On 10th September 2018 Notification No.44/2018 Central Tax was issued vide which the due date of filing return under section 39 of CGST Act 2017, 2017 (FORM GSTR-3) for the months of July 2017 to March 2019 will be notified in future. We all know that FORM GSTR-3 are in suspended mode even as on date

Now if GSTR-3 is in suspended mode then out of two time-limits to claim ITC above, first time limit (i.e. the due date of filing of return under section 39 in “FORM GSTR-3” for the month of the month of September of the succeeding year) is gone and only one time-limit is left out i.e. filing of the annual return for the relevant year. The due date for the filing of the Annual Return for the Financial Year 2017-18 is 31^st August which means that taxpayers are still eligible to claim ITC for the Financial Year 2017-18.

In the light of this judgement I am of the opinion that last date for availing input tax credit relating to invoices and debit note issued during the period July 2017 to March 2018 should be last date for filing annual return (FORM GSTR-9) for the period July 2017 to March 2018 i.e. 31st August 2019.

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