GSTR-3B for Sept ’21 – Censorious compliance followed by Hidden cost

Introduction

On 17^th October 2021, The Goods and Service Tax network (GSTN) has issued advisory for tax payers to ensure that Input Tax Credit pertaining to invoice or debit notes for financial year 2020-21 should be availed on or before the due dates of filing GSTR-3B for the month of September 2021 in accordance with the Provisions of Section 16(4) of CGST Act, 2017.  Although the advisory is informative in nature but it should be considered as cautionary statement for a tax payer.

The hidden words

By virtue of such tax advisory, the GST Department has made it’s stand crystal clear that a tax payer has to strictly comply with the provisions of Section 16(2)(c) of CGST Act, 2017 and GST Portal itself will ensure that such ITC is reflected as “ITC not available” to tax payers. Such inference can me made as it has been categorically mentioned in the advisory that “Records (invoice or debit notes) pertaining to Financial Year 2020-21 reported in GSTR-1 after due date of GSTR-3B of September 2021 will not reflect as “ITC Available” in GSTR-2B of the recipients. Such records will reflect in “ITC Not Available” section of GSTR-2B and such ITC shall in turn not be auto-populated in GSTR-3B. Further it will also not reflect as “ITC as per GSTR-2A” in Table-8A of GSTR-9 of the recipients”.

Ideally, the words used in tax advisory read as “taxpayers may take note of the above and ensure that their records pertaining to Financial Year 2020-21 are reported on or before the due date of their GSTR-3B for the month September 2021” shall be constructed as a cautionary statement by tax payers. The actual point is, input tax credit of a tax payer for the transactions pertaining to FY 2020-21 shall not be availed as per the provisions of Section 16(2)(c) of CGST Act, 2017 if such transactions are not reported by respective vendors/suppliers in their GSTR-1 filed for the period till September 2021. The GST Portal itself will highlight it as “ITC not available”

For example, XYZ Ltd. a tax payer company has procured services from ABC Ltd. in March 2021. ABC Ltd. has not reported the details of sale of services to XYZ Ltd. in their GSTR-1 filed till the period September 2021. Ultimately, XYZ Ltd. ought to lose the Input Tax Credit under Section 16(2)(c) of CGST Act, 2017 as by 11^th October, 2021 the transactions are not reported by ABC Ltd. Considering the above facts, the tax payer doesn’t have an option to ensure the reporting of such transaction as the due dates are already gone. In fact, a tax payer has to ensure that Input Tax Credit pertaining to ABC Ltd. for procurement of Services are not availed by XYZ Ltd. as it will lead to litigation and penal consequences. In nutshell, albeit the tax advisory mentions the words “ensure that their records pertaining to Financial Year 2020-21 are reported on or before the due date of their GSTR-3B for the month September 2021”, the entire thirst is on “ensuring the non-reporting of credit which has lapsed by virtue of Section 16(2)(c) read with Section 16(4) of CGST Act, 2017”

The actual point to be ensured by a tax payer

Apart from ensuring non reporting of credit for availment and utilisation which has lapsed due to above mentioned limitations, the emphasis should be made on the words that transactions “are reported on or before the due date of their GSTR-3B for the month September 2021”. It means that all the eligible Input Tax credit as per the Provisions of Section 16 of CGST Act, 2017 pertaining to the FY 2020-21 should be reported by applicable due dates of 20^th October 2021, 22^nd October 2021 or 24^th October 2021, as the case may be. It is pertinent to note that the wordings of tax advisory is in line with Section 16(4) of CGST Act, 2017 which place emphasis on the words “due date”. The credit should be availed on or before the due dates and hence the tax payer may not have option to file delayed GSTR-3B for the month of September 2021 as the credit will lapse if it is filed after the applicable due dates.

There may be a general scenario for a tax payer that Books of Accounts for a particular month is not closed within the due dates of filing GSTR-1 and GSTR-3B due to non-availability of details such as invoices, debit notes, credit notes etc. In such case, GST Portal allows tax payers to file delayed returns of GSTR-1 and GSTR-3B along with the payment of applicable interest and late fees. However, for the month of September 2021 a tax payer may have to file GSTR-3B within the applicable due dates even if the accounts are not closed and if the amount of ITC which may lapse is significant compared to interest liability for reporting the transaction pertaining to September 2021 month in subsequent month.

Is the any remedy for tax payer?

Although, the GSTN has made it clear that a tax payer has to comply with Provision of Section 16(2)(c) rw. Section 16(4) of CGST Act, 2017 which is in line with recent advance ruling in case of Easter Coalfields Ltd, AAR West Bengal – [2021] 130 taxmann.com 232 (AAR-WEST BENGAL). The highlights of controversy over such provision is of much relevance at this juncture and the same is as under: –

1. The Provision prescribed under section 16(2)(c) of CGST Act, 2017 has been challenged through various writ petition before the court in case of: –

• • High Court of Delhi in case of Federation of Indian Small Scale Battery Associations (Regd.) v. Union of India [2021] 127 taxmann.com 335/86 GST 399
  • High Court of Gujarat in case of Surat Mercantile Association v. Union of India [2021] 124 taxmann.com 342/85 GST 184.

2. Press release issued by the Central Board of GST council on 4-5-2018 wherein it is mentioned that there shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller however reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc

3. Decision given by Madras High Court in case of DY Beathal Enterprises v. STO [WP. (M D) Nos. 2127 of 2021, dated 24-2-2021] wherein the case was remitted back on the grounds that a tax payer cannot be denied of Input Tax credit unless recovery actions are taken against the defaulting vendors/suppliers.

Conclusion

It is advisable for a taxpayer to ensure following points while filing GSTR-3B for the month of September 2021: –

• The Input Tax Credit for the FY 2020-21 and falling within the purview of Section 16 of CGST Act, 2017 is availed.
• If the Input Tax Credit for the FY 2020-21 is pending to be availed, then GSTR-3B for the month of September 2021 should be compulsorily filed within the applicable due dates i.e 20^th October 2021, 22^nd October 2021 or 24^th October 2021 as the case may be. If GSTR-3B is filed after the due dates, then the ITC will lapse.
• If differences are noted, during the process of reconciliation of Input Tax credit for FY 2020-21 as per GSTR-3B, Books of Account and GSTR-2A/2B, the resultant effect of such differences are given in GSTR-3B filed till the month of September 2021. Else, penal consequences will follow.

Filing of GSTR-3B for the month of September 2021 is censorious compliance when Input Tax Credit for the FY 2020-21 will reach to the conclusion i.e. either it will lapse or it will be availed. The ITC which will lapse will be reflected as “ITC not available” by GSTR Portal itself. The question is whether such kind of configuration in GST Portal by GST Department for reflecting the Input Tax Credit as “ITC not available” is legally valid?  We have already discussed the decision of Madras High Court in case of DY Beathal Enterprises v. STO [WP. (M D) Nos. 2127 of 2021, dated 24-2-2021] wherein it was held that a tax payer cannot be straight away denied of Input Tax Credit unless the recovery action is taken against the vendor/supplier. Therefore, even if the GST Portal is reflecting the ITC as “ITC not available”, it may not be necessary that a tax payer will straight way lose the credit as per the Principle laid down by Madras High Court. However, as per recent advance ruling in case of Easter Coalfields Ltd, AAR West Bengal – [2021] 130 taxmann.com 232 (AAR-WEST BENGAL) it has been held that ITC will not be available to tax payer if the transactions pertaining to FY 2020-21 are not report by vendor/supplier in their GSTR-1 filed for the period till September 2021. Overall, the above discussed provisions are still not legally settled and open to litigation in future.