GSTR1 & GSTR 3B return to be filed for the month of September is very significant as the taxpayers can rectify the errors, to the extent permissible, made / undisclosed in the returns filed during the previous financial year.
The statutory timeline for the above irregularities can be rectified in the return filed for the month of September following the end of the financial year to which such error pertains. For instance, errors, if any, made in the returns filed for the FY 2020-2021 can be rectified up till the due date of filing of the return for the month of September ’21.
Taxpayers often confuse the time limit given in the law as till they file return of the month of September, when on the contrary the time limit so prescribed in the act is the due date of filing of return and not when the return is actually filed. So, the first key takeaway in this case would be to note that in order to be able to avail / pass on the benefit of adjustment / rectification of previous year, the same should be filed within the due date, i.e. 20th / 22nd / 24th October 2021.
There would be a number of changes and adjustments which are to be / can be shown in the return, however the focus in this article is on those changes only which are brought forward from the previous financial year. Such various implications that need the attention of the stakeholders on which necessary action is required is being discussed herewith:
Section 16(4) of The Central Goods and Services Tax Act, 2017 provides that the due date of furnishing of the return for the month of September following the end of the financial year shall be the time limit within which Input Tax Credit in respect of any invoice or debit note relating to the financial year should be claimed. As GSTR -2A/ GSTR- 2B was implemented to bring the proposed matching concept of Input Tax Credit, the registered persons were restricted to avail credit every month to the extent, the said invoices were reflecting in these forms with certain relaxation. Due to the concerned restriction existing owing to the implementation of matching concept, there may be instances where the registered person has not availed Input Tax Credit against certain invoices as they are not reflecting in form GSTR- 2A/ GSTR- 2B. Therefore, all registered person should perform yearly review of the Input Tax Credit recorded in their books of accounts along with data reflecting in GSTR- 2A/ GSTR- 2B to assess the Input Tax Credit to be availed in the September return for the previous financial year which they have not claimed in the relevant tax period.
Performing such exercise will ensure that the taxpayers do not incur any loss on account of non-availment of eligible Input Tax Credit which otherwise will not be available to the registered person post the availment due date.
Rules 42 and Rule 43 of The Central Goods and Services Tax Rules, 2017 prescribes the manner of reversal of Input Tax Credit as called for in Section 17(1) and Section 17(2) of The Central Goods and Services Tax Act, 2017. The manner set down in the rules demands for reversal of Input Tax Credit in accordance with the formulae specified, for every tax period. In addition to the reversal made for every tax period, the reversal amount has to be finally recomputed on completion of the financial year but before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit relates. If the re-calculated amount exceeds the amount so reversed in the financial year, such excess amount along with the applicable interest rate as specified in Section 50(1) of The Central Goods and Services Tax Act, 2017 shall be reversed in FORM GSTR- 3B or in DRC- 03 and in case, the amount so reversed in the financial year exceeds the amount so determined on re-calculation, the excess Input Tax Credit shall be claimed by the registered person. Such reversal or claim of the Input Tax Credit which is determined on re-computation is required to be done by the registered person up till the due date of return for the month not later than September following the end of the financial year to which such Input Tax Credit relates.
Delaying this activity would entail interest obligation on the taxpayer.
First proviso to Section 37(3) of The Central Goods and Services Tax Act, 2017 lays down the time limit within which error or omission in relation to outward supply, if any, may be rectified upon discovery of the same. As set out in the proviso, all such rectifications may be made up till filing of the return for the month of September following the end of the financial year to which such error or omission pertains. The error or omission may be in respect of invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made during any tax period. The pertinent factor to be considered in the provision is that the time limit is up till filing of the return and not up till the due date of the filing of the return as it was for availment of Input Tax Credit. Therefore, taxpayers may suo-moto rectify any error or omission in the returns filed during a tax period along with payment of interest, in case where there is short payment of taxes, which has been discovered well within the established time limit. To ensure that all such errors or omissions have been identified, the taxpayers should perform yearly reconciliation of the outward supply recorded in the books of accounts with the outward supply disclosed and reported in the returns filed during the relevant tax period. Such reconciliation process when performed within the stipulated time-limit will safeguard the taxpayer from the hassle cause by unwarranted notices from the department on account of short disclosure of outward supply.
A bonus in this case would be that the said purchaser / receiver of the goods / services would be eligible to claim such ITC being reported in the return now.
In case where the tax amount charged or the taxable value reflecting in tax invoice issued by a registered person for a supply is detected to exceed the value of such supply made or where the supply made is to be returned, the registered person in such cases is required to issue a Credit Note in accordance with Section 34 of The Central Goods and Services Act, 2017. Section 34(2) of The Central Goods and Services Tax Act, 2017 specifies that such credit note shall be furnished in the return not later than the return filed for the month of September following the end of the financial year to which such supply relates. To rephrase it, it can be said that where the registered person desires to adjust the output tax liability owing to the reasons mentioned above, such credit note should be issued within the stipulated time period. The registered person should review the supplies made in the financial year and all the returns accepted as well to ensure that Credit Notes against the same have been issued in accordance with the law and tax adjustments wherever required to be made, have been correctly accounted for via issuance of Credit Notes and appropriately disclosed in the return filed up till the month of September following the end of the financial year to which such supply relates.
Credit notes can be issued as a financial credit note also, however if done within the time period, the tax element can be adjusted and would therefore lead to reduction in cost.
It is therefore advisable for the taxpayers to take all precautionary measures before filing of the return for the month of September as it is the last date up to which the registered person may make the desired tax adjustments with respect to Input Tax Credit or Output Tax Liability as warranted by the Goods and Services Tax law.
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