There was amendment in Section 75(12) of the Central Goods and Services Tax Act, 2017 (“the CGST Act, 2017”), which were introduced vide the Finance Act, 2021 but brought into effect only from January 1,2022 through Notification No. 39/2021-Central Tax, Dated December 21, 2021. A new Explanation to Section 75(12) was inserted by the aforesaid amendment.

“Section 75 General provisions relating to determination of tax.

(12) Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.

Explanation.––For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.”

The above amendment has been made to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies which have been furnished in FORM GSTR-1 under section 37 of the CGST Act, 2017 but not included in the return furnished in FORM GSTR-3B under section 39 of the CGST Act, 2017. The stated move was aimed at curbing the menace of fake billing whereby seller was showing higher sales in FORM GSTR-1 to enable a purchaser to claim ITC but report suppressed sales in FORM GSTR-3B to lower GST liability. Hence, recovery under GST may be initiated straightaway under section 79 of the CGST Act, 2017 without even resorting to issuance of SCN under section 73 (Non-Fraud cases) or section 74 (Fraud cases) of the CGST Act, 2017.

However, it is to be noted that in some cases, there may be a genuine reason for the differences between the details of outward supplies declared in FORM GSTR-1 and those declared in FORM GSTR-3B. For instance, if a registered person has wrongly furnished its outward supply in FORM GSTR-1 as Rs. 10 lakhs whereas it should have been only Rs.  1 lakh and has paid GST in FORM GSTR-3B on Rs. 1 lakh. Consequently, there would be a difference between outward supply shown in FORM GSTR-1 vs. FORM GSTR-3B of the relevant period. Another example, the registered person may have omissions in the FORM GSTR-1 or FORM GSTR-3B of a particular month.

Amendment in Section 16 of the CGST Act, 2017 w.e.f. 01.01.2022.

To give the statutory backing for claiming ITC as per FORM GSTR-2B, Finance Act, 2021 has inserted a new clause (aa) to sub-section (2) of section 16 of CGST Act, 2017

“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;.

Further, with the aforesaid amendment by Finance Act, 2021, Rule 36(4) of the CGST Rules, 2017 loses its purpose while the new clause (aa) under Section 16(2) of the CGST Act, 2017 comes into force. Now there is no relevance of restriction on availment of ITC under Rule 36(4) of the CGST Act, 2017.

The GST Council suggested an amendment to Rule 36(4) during the 45th meeting in September 2021. The amendment was notified on 29th December 2021 through the Central Tax Notification No. 40/2021 to add the same condition that clause (aa) of Section 16(2) stated.

Therefore, the Government, vide Notification No. 39/2021–Central Tax dated 21.12.2021 notified the below mentioned amendments of the Finance Act, 2021 w.e.f. January 01, 2022 and accordingly, Rule 36(4) of the CGST Rules, 2017 was fully substituted by further amended vide Notification No. 40/2021-Central Tax, dated 29.12.2021 w.e.f. 01.01.2022. The rule after amendment read as below:

“(4) Input tax credit shall be available by a registered person in respect of invoices or debit notes the details of which are required to be furnished under sub-section (1) of section 37 unless-

(a) The details of such invoices or debit notes have been furnished by the supplier in the statement of outward supplies in FORM GSTR-1 or using the invoice furnishing facility; and

(b) The details of such invoices or debit notes have been communicated to the registered person in FORM GSTR-2B under sub-rule (7) of rule 60.”

From 1st January, 2022 onwards, registered person must claim ITC that only appears in FORM GSTR-2B. The recently added condition allows you to avail ITC if your vendor declares that invoice or debit note in their corresponding FORM GSTR-1 or Invoice Furnishing Facility (IFF). It must finally be found in your returns auto-generated under Section 38, such as FORM GSTR-2BThat is the first time when FORM GSTR 2B became very crucial to match the ITC.

Amendment in Section 37 and 39 of the CGST Act, 2017 w.e.f. 01.10.2022.

Further, to make check and balance of ITC, the Central Government, by the Finance Act, 2022, had inserted a new sub-section (4) in section 37 of the Central Goods and Services Tax Act, 2017 (CGST act, 2017) and the same has been notified by Notification No. 18/2022–Central Tax dated 28th September, 2022 with effect from 01 October, 2022. New sub-section (4) of section 37 of the CGST Act, 2017 is as under-

Section 37(4): A registered person shall not be allowed to furnish the details of outward supplies under sub-section (1) for a tax period, if the details of outward supplies for any of the previous tax periods has not been furnished by him:

PROVIDED that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the details of outward supplies under sub-section (1), even if he has not furnished the details of outward supplies for one or more previous tax periods.

Further, sub-section (10) of Section 39 of the CGST Act, 2017 had also been substituted by the Finance Act, 2022 and the same has been notified by Notification No. 18/2022–Central Tax dated 28th September, 2022 with effect from 01 October, 2022. The substituted sub-section (10) of section 39 of the CGST Act, 2017 is as under

Section 39(10): A registered person shall not be allowed to furnish a return for a tax period if the return for any of the previous tax periods or the details of outward supplies under sub-section (1) of section 37 for the said tax period has not been furnished by him:

Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the return, even if he has not furnished the returns for one or more previous tax periods or has not furnished the details of outward supplies under subsection (1) of section 37 for the said tax period.

The move is aimed at curbing issuance of fake invoices and tax evasion. These changes are being implemented prospectively and will be operational on GST Portal from 01st November, 2022. Accordingly, from October-2022 tax period onwards, the filing of previous period FORM GSTR-1 will be mandatory before filing current period FORM GSTR-1.

Illustration: Filing of October, 2022 period FORM GSTR-1 will be mandatory before filing FORM GSTR-1 of November, 2022 period. Further, from October, 2022 tax period onwards, filing of FORM GSTR-1 will also be mandatory before filing FORM GSTR-3B.

Illustration: Taxpayer will not be allowed to file FORM GSTR-3B for October, 2022 period if FORM GSTR-1 of October, 2022 period is not filed.

The FORM GSTR-1 is a return form for regular taxpayers who have to file details of outward supplies (under Rule 59) on every 11th of next month for those who cross the turnover more than 1.5 crores annually. The taxpayers who are under the threshold limit to 1.5 crores will have to file quarterly return.

FORM GSTR -2B w.e.f. 01.10.2022

Section 38 of CGST Act, 2017 has been modified in Finance Act 2022 and notified by Notification No. 18/2022–Central Tax dated 28th September, 2022 w.e.f. 01.10.2022, as below:

“38. Communication of details of inward supplies and input tax credit

(1) The details of outward supplies furnished by the registered person under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit shall be made available electronically to the recipient of such supplies in such forms and manner, within such time, and subject to such conditions and restrictions as may be prescribed.

(2) The auto-generated statement under sub-section (1) shall consist of–– 

(a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and 

(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37,–– 

(i) by any registered person within such period of taking registration as may be prescribed; or 

(ii) by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or 

(iii) by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said subsection during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or 

(iv) by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed; or

(v) by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be prescribed; or

(vi) by such other class of persons as may be prescribed.”

As per provisions of section 38(2) of the CGST Act, 2017 notified vide Notification No. 18/2022–Central Tax dated 28th September, 2022 effected from 01-10-2022 the auto generated statement (may be GSTR-2B) consisting of two parts shall be provided.

– One part shall state eligible Input Tax Credit which the Recipient can avail and utilize.

– The second part shall provide details of such supplies in respect of which Input Tax Credit cannot be availed by the Recipient wholly or partly as may be prescribed.

So, to know the eligible ITC and restricted ITC as per section 16(2)(ba) of the CGST Act, 2017, the recipient shall have to check the second part of the FORM GSTR-2B.

It is to be noted that the following ‘suppliers’ may be prescribed for the purpose of section 38(2)(b) CGST.

1. Supply by the newly Registered Person within such period of taking registration as may be prescribed [for this Government will issue notification];

2. Supply by the registered person who has defaulted in payment of tax and such default has continued for such period as may be prescribed [for this Government will issue notification].

3. Supply by the registered person whose Output Tax Payable (as per FORM GSTR-1) exceeding the output tax paid (as per FORM GSTR-3B).

4. Supply by the registered person who availed ITC in excess of eligible input tax appearing in FORM GSTR-2B.

5. Supply by the registered person who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49. Provisions under section 49(12) are relating to minimum payment of output tax in cash even there is credit balance available in electronic credit ledger.

6. By such class of persons as may be prescribed.

It is important to note that now the recipient shall have not to do any work on to locate the supplier whose supply shall not be eligible for the purpose of input tax credit as per section 38 of the CGST Act, 2017. Such details of supply shall be available to the recipient through auto generated statement in FORM GSTR-2B.

*****

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.

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