Welcome Internal Circular of MH state on GST mismatch issues

Arjuna (Fictional Character): Krishna the internal circular has been issued by Maharashtra State GST department on 25/02/2022. What this circular about?

Krishna (Fictional Character): Arjuna the circular has been issued to give guidelines with respect to legal issues pertaining to return scrutiny for tax periods 2017-18 and 18-19. In this circular the action to be taken by department has been explained, the taxpayer can take reference of the same while submitting reply to notice.

Read: Guidelines for GST return scrutiny for tax periods 2017-18 & 2018-19

Arjuna (Fictional Character): Krishna, what important clarification issued in these circular.

Krishna (Fictional Character): Arjuna, the important clarification issued in these circulars with respect to outward supply is:

1) Issues arising from incorrect reporting of GSTR-1 in which B2B transaction reported as B2C supply

2) Issues regarding typographical errors in reporting details of outward supplies in table 4 (Details of B2B supplies), 5 (B2C large invoices), 6 (Export invoices), 7 (B2C other), 11 (Tax liability of advance received) of GSTR-1 which lead to excess liability in GSTR-1 as compared to GSTR 3B.

Arjuna (Fictional Character): What solution has been given to department officers for the above issues of outward supply?

Krishna (Fictional Character): The officer should obtain the transaction wise details of outward supplies from taxpayer for the period under scrutiny and reconcile it with category wise outward supplies reported in GSTR-1 of corresponding period and figure out transaction shifted from B2C to B2B and make the corresponding changes in B2C at the same time. In case of B2B transactions, take undertaking of recipient that he had not availed excess ITC on account of said errors committed by supplier.

In case of export, verify it with turnover of export considered while granting the refund.

Arjuna (Fictional Character): Is there any clarification regarding ITC in above circular?

Krishna (Fictional Character): Difference in ITC claim of GSTR-3B and ITC available in GSTR-2A of taxpayer on accounts of following reasons:

1) Supplier has reported B2B supplies as B2C supplies in GSTR-1 and they could not amend it till expiry of time limit. So, these transactions have not appeared in GSTR-2A of actual recipient to whom notices served.

2) Few supplies have reported B2B supplies against GSTIN of some other taxpayer instead of actual recipient.

3) Supplier had missed reporting of B2B transactions in his GSTR-1

4) Supplier had reported B2B transactions taxable under forward charge in Table 4B of his GSTR-1 instead of Table 4A.

5) B2B transaction in GSTR-1 mistakenly reported as transaction liable to RCM by the supplier.

6) In some of the case replies are received that the ineligible ITC , which has been pointed out in ASMT-10 was already reversed by taxpayer in return of subsequent period, however the format in GSTR-3B is not so exclusive and no separate column is provided for such reversal hence the amount of ITC reversed for previous period is not eligible from the return form itself

Arjuna (Fictional Character): What solution has been given to department officers for the above issue?

Krishna (Fictional Character): In the above issue relating to ITC claim of GSTR-3B and GSTR-2A proper officer may in case where difference in ITC claim (CGST+SGST or IGST) per supplier is 2.5 lakh or more, ask the claimant to obtain certification from Chartered accountant of the said supplier certifying the output transaction and tax paid thereon so as to comply with the provision of section 16 and where difference in ITC is 2.5 lakh or less ,ask the claimant to obtain ledger confirmation of the concerned supplier along with his/her certification.

For RCM liability issue the proper officer upon receipt of reply from taxpayer under scrutiny may verify whether supplier has paid the due tax on such transactions which have been wrongly reported in Table 4B of GSTR-1.

In relation to ineligible ITC where taxpayer replies with reference to specific return period, then calculation of reversal in table 4(B) (2) of that specified return period along with transaction list should be obtained from the tax payers and verified with ITC claim, reversal, other reversal, etc. Alternatively, it can be verified from DRC-03 filed by the tax payer, if any.

Arjuna (Fictional Character): What lesson one should get from the above?

Krishna (Fictional Character): Such internal circulars are helpful to assessing officer to decide the issues, however there is a need to give relief to genuine taxpayer from the unwanted mismatch issues. The clarification issued by the Maharashtra state department should also be issued by Central GST department in the benefit of all taxpayers.