Since 9th October 2019, a fight has been going on between GSTR 2A introduced by the GST Authorities and the Books of Accounts kept by the assessees. Finally, the Hon’ble Supreme Court has declared Books of Accounts as the winners, vide its judgement in Civil Appeal No. S.L.P. (C) No. 8654 of 2020, declared on 28th October 2021.
CBIC had issued a press release on October 18, 2018 clarifying that:
“Furnishing of outward details in FORM GSTR-1 by the corresponding supplier(s) and the facility to view the same in FORM GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on a self-assessment basis”.
But, the Government, vide Notification No. 49/2019-Central Tax dated 09-10-2019, introduced an amendment to the GST Rules, which read as under:
“Input Tax Credit to be availed by a registered person in respect of Invoice or debit notes, the details of which have not been uploaded by the selling dealers under sub sction (1) of Section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the selling dealers under sub section (1) of section 37.”
The above amendment says that the recipient can avail of the Input Tax Credit only on the basis of the supply details uploaded by the suppliers, which get reflected in the GSTR 2A in the portal. In effect, the recipient’s Input Tax Credit is restricted, based on the Tax component reflected in the GSTR 2A.
Further, the Government, vide Notification No. 79/2020 dated 15-10-2020, also amended Rule 60 (1) to bring in a new format for GSTR 2A.
Since the Recipient had no control over the filing and remittance of Tax by the Supplier, this restriction of Input Tax Credit based on the GSTR 2A was challenged before many of the Hon’ble High Courts in the country. Though the Central Government filed a petition to transfer all such suits filed before various Hon’ble High Courts to the Hon’ble Supreme Court, the Hon’ble Supreme Court decided to have the rulings to be made the Hon’ble High Courts, after which it would deal with the issue.
While that being the situation, in the Civil Appeal referred to above, the Hon’ble Supreme Court has dealt at length, the weighed the credibility of GSTR 2A and the self-assessment of taxes by the assessees, on the basis of the books of accounts kept by them.
Let us analyse the situation, after this significant judgement of the Hon’ble Supreme Court.
Point no. 20 of the Judgement, brings out the points raised by the Additional Solicitor General of India:
“The right to claim ITC, being a statutory right, is circumscribed by conditions and restrictions, subject to which a registered person is entitled to take credit. The provisions regarding entitlement of ITC enable a registered person to utilize the same for discharging the OTL. It is imperative upon a registered person to maintain records regarding transactions between suppliers and the recipients based on their agreements, invoices and books of accounts, either manually or electronically.
The records so maintained by the registered person would itself reveal about the eligibility to credit; and its availment is within the exclusive domain of the supplier and the recipient concerned. The registered person under the law is obliged to do a self-assessment of its transactions and determine the OTL and exercise the option to avail of and utilize the ITC to the extent required or to pay the OTL by cash.”
From the above two paragraphs, the Central Government agrees that the availment of ITC, rests on the books of accounts and other records maintained by the assessees.
“The Authorities have no role to play whatsoever in that regard. It is an option to be exercised by the registered person and not by the Authorities. This principle has remained the same both before the GST and also post GST regime. Indeed, the registered person has been provided with a common electronic portal or tax electronic portal, which is only an enabler and a facilitator in bringing on board all the registered persons which include the supplier, recipient, registered person and other recipients.”
The above paragraph states that the Authorities have no role to play with regard to self-assessement of tax payable, arrived at by the assessee based on the books of accounts and records maintained by him. It further states that the information uploaded in the electronic portal is only an enabler and a facilitator.
“The efficacy of common electronic portal or so to say malfunctioning thereof, does not extricate the registered person from the primary obligation of self-assessment of OTL as predicated in Section 16 of the 2017 Act. For doing so, the registered person is obliged to maintain accounts and records as envisaged under Chapter VII of the 2017 Rules. That ought to be the basis for self-assessment of OTL in the first place.
On the basis of the facts and figures emanating from such records, the registered person can collate the relevant information regarding entitlement to avail ITC collected from supplier of goods or services or for both which are used or intended to be used in the course of furtherance of his business. Suffice it to observe that the registered person is expected to exercise the option of utilizing ITC or to pay by cash for discharging his OTL at the time of filing of return on the information gathered from the primary record in his possession.”
The above two paragraphs reiterate that the registered person is to self-assess his tax liability, based on the information gathered from the primary record in his possession.
Second paragraph of Point no.22 reads as follows:
“Similar obligation was required to be discharged by him even before the GST regime came into being vide the 2017 Act with effect from 01.07.2017. The functions or features provided in the common electronic portal of auto matching and auto populating of the record of the supplier and the recipient and vice versa are only a facility made available to the registered person.”
This paragraph once again concretize the stand of the Government that the matching and auto populating of the record of the supplier and the recipient are only a facility made available to the registered person.
Similarly paragraph 3 of Point no. 24, in the judgement reads as:
“The eligibility of ITC and the right to exercise option to pay the OTL through the mode of his choice would come later. For doing the self-assessment, the registered person is fully equipped with accounts and records maintained by him as per the statutory requirement, which are in his complete control and knowledge.”
The above paragraph declares that the self-assessment is to be made based on the accounts and records maintained by the tax-payer.
The third paragraph of Point no. 32, which is a part of the conclusion arrived at by the Hon’ble Supreme Court, is as follows:
“The High Court, however, did not enquire into the cardinal question as to whether the writ petitioner was required to be fully or wholly dependent on the auto generated information in the electronic common platform for discharging its obligation to pay OTL for the relevant period between July and September 2017.
The answer is an emphatic No. In that, the writ petitioner being a registered person, was under a legal obligation to maintain books of accounts and records as per the provisions of the 2017 Act and Chapter VII of the 2017 Rules regarding the transactions in respect of which the OTL would occur.
This is a much more important observation by the Hon’ble Supreme Court. It states that the answer to a querry raised by the Hon’ble Court as to whether the writ petition was required to be fully or wholly dependent on the auto generated information in the electronic common platform for discharging his obligation to pay OTL is an emphatic No. By this observation, it is crystal clear that the tax-payer is not required to be dependent on the auto generated information in the electronic common platform (GSTR 2A) for discharging his tax liabilities. In other words, it tends to say that GSTR 2A has not to be seen as a basis for arriving at the tax liability of a tax-payer.
Point no. 33 of the judgement states that
“As per the scheme of the 2017 Act, it is noticed that registered person is obliged to do self-assessment of ITC, reckon its eligibility to ITC and or OTL including the balance amount lying in cash or credit ledge primarily on the basis of his office record and books of accounts …..”.
This part of the judgement, brings to light the fact that the Books of Accounts and Records maintained by the registered person reigns over the information furnished in the GST Portal.
The third paragraph in point no. 33 of the judgement once again lays stress on the supremacy of books of accounts over Common Portal. It says:
“The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment. The primary source is in the form of agreements, invoices/challans, receipts of the goods and services and books of accounts which are maintained by the assessee manually/electronically.”
It emphasizes that the common portal is only a facilitator as mentioned in the Press Note released by the CBIC on 18th October 2018.
Paragraph no. 5 of Point no.33, clarifies regarding the role of tax authorities. It reads:
“Indeed, that self-assessment and declarations would be any way subject to verification by the tax authorities. The role of tax authorities would come at the time of verification of the declarations and returns submitted/filed by the registered person.”
In other words, veracity of the declaration and returns submitted or filed by a registered person has to be verified only at a later stage.
Yet another point brought out by the judgement is paragraph 2 of Point no. 34 of the judgement:
The “electronic credit ledger” is defined in Section 2(46) and is referred to in Section 49(2) of the 2017 Act, which provides for the manner in which ITC may be availed. Section 41(1) envisages that every registered person shall be entitled to take credit of eligible input tax, as selfassessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.
By this observation, it is evident that “……..every registered person shall be entitled to take credit of eligible input tax, as selfassessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.” This part of the judgement makes it clear that every registered person shall be entitled to the self-assessed Input Tax Credit and also that such amount shall be credited on a provisional basis to his electronic credit ledger, which is envisaged as per Section 41(1) of the GST Act. The mandatory clause of availing and crediting the self-assessed Input Tax of a registered person can in no way be snatched away vide any Rule, subsequently introduced.
Paragraph no. 36 of the judgement states that an assessee is not fully or wholly dependent on the common portal for furnishing his returns. When read in another way, the Government also shall not be fully or wholly dependent on the common portal for arriving at a conclusion as to the veracity of the information furnished in the Returns filed by the assessee.
The Paragraph no. 2 of Point no. 39 of the judgement states that “Notably, the validity of that amendment including that of Notification dated 09-10-2019 bearing No. 49/2019, is not put in issue before us.” It is to be specially noted that the main contention agitated before various Hon’ble High Courts is regarding the validity and maintainability of Notification No. 49/2019 and Section 16 (2) (c) of the GST Act. Since the Hon’ble Supreme Court has left this point open, it has now to be agitated before the various Hon’ble High Courts and a decision to be arrived at by these Courts.
Point no. 46 of the judgement brings to light that it is
“statutory obligation fastened upon the registered person to maintain books of accounts and record within the meaning of Chapter VII of the 2017 Rules, which are primary documents and source material on the basis of which self-assessment is done by the registered person including about his eligibility and entitlement to get ITC and of OTL.”
Even by a general study of the judgement by the Hon’ble Supreme Court in the Civil Appeal mentioned above, wherein the Government of India is the appellant, and the averments of the appellant have been approved of by the Hon’ble Supreme Court, one can come to the conclusion that a registered person has to maintain his books of accounts and records properly and depend on them for self-assessing his taxability and that GSTR 2A is only a facilitating tool, which has no relevance as to arriving at the final figure of self-assessed tax.
Thus the Books of Accounts and Records maintained by a registered person has been declared victorious by the Hon’ble Supreme Court of India, against its fight against GSTR 2A, a form self-generated in the Common Platform of the GST.