1. In life match-making is perhaps necessary only once. If one finds a perfect match (perfection is subjective) life becomes much more joyous and blissful. However coming to GST, such match-making is to be done continuously. Also it is not necessary that even after a successful match, life will be joyous.
2. Current month perhaps is the mother of all the months till date when it comes to match-making. Why do we say so ? Please read on.
3. Following tasks shall assume importance:
4. Vide Removal of difficulty Order No. 02/2018-Central Tax dt. 31.12.2018 following proviso has been inserted u/s 16(4) of the CGST Act, 2017:
“Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019”.
5. To appreciate the implications of the above inserted proviso, we need to first understand the background under which it came into being.
6. Readers may note that Sec. 16(4) of the CGST Act, 2017 provides for the time limit within which input tax credit (“ITC”) needs to be claimed. Said provision provides that ITC in respect of any invoice or debit note pertaining to a particular financial year (FY 2017-18 for the present discussion) cannot be claimed after the due date of furnishing of the return under section 39 for the month of September following the end of such financial year to which such invoice or invoice relating to such debit note relates. In other words, ITC in respect of invoices issued in FY 2017-18 cannot be claimed after 25.10.2018 (i.e. extended due date for filing GSTR-3B for September, 2018).
7. Now one may debate on whether GSTR-3B is a “return u/s 39” or not and the persons (including the author) claiming that GSTR-3B is not a return u/s 39 may have good merits to support the stand, the issue shall however be litigatious. Hence we shall assume that GSTR-3B is indeed a return contemplated u/s 16(4) and proceed.
8. As the deadline for claiming ITC for FY 2017-18 approached, various industry bodies made representations to the Government seeking extension of time limits for claiming the ITC more particularly with the plea that even the deadline for making any corrections in GSTR-1 for FY 2017-18 has been extended till 31.10.2018 (given that GSTR-2A can be freezed only if GSTR-1 is freezed).
9. Government came out with a Press Release dated 18.10.2018 rejecting the demands of the industry by holding as under:
“4. It is clarified that the 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 self-assessment basis in consonance with the provisions of section 16 of the Act. The apprehension that ITC can be availed only on the basis of reconciliation between FORM GSTR-2A and FORM GSTR-3B conducted before the due date for filing of return in FORM GSTR-3B for the month of September, 2018 is unfounded as the same exercise can be done thereafter also.”
10. Said Press Release also suggested that the taxpayers should be compliance savvy (as if they are not !!). Anyways, the clear message given to the taxpayers was that the claim of ITC shall not be based on the reconciliation with GSTR-2A (correct legal position). It will be based on the fulfilment of the conditions stipulated u/s 16.
11. Much later in December, 2018 Government did appreciate the concerns of the industry and inserted the proviso (supra)u/s 16(4). Now the proviso says that ITC in respect of invoices or debit notes pertaining to the invoices for FY 2017-18 can be claimed even after 25.10.2018 till the due date of furnishing the return for the month of March, 2019 (20th April shall be the due date) if the details of such invoices/debit notes have been uploaded by the concerned supplier till the due date for filing GSTR-1 for the month of March, 2019 (i.e. 11th April).
12. Accordingly following proviso has been inserted u/s 37(3) to permit any rectifications of error or omission in GSTR -1 for invoices/debit notes related to FY 2017-18:
“Provided further that the rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September, 2018 till the due date for furnishing the details under subsection (1) for the month of March, 2019 or for the quarter January, 2019 to March, 2019.”.
13. Hence a new condition has been inserted only in respect of ITC on those invoices/debit notes pertaining to FY 2017-18 for which claim is made between 26.10.2018 to 20.04.2019.
14. Hence following steps may be followed:
a. Have you identified the ITC which is admissible in respect of FY 2017-18 ?
b. If yes, have you claimed the said ITC on or before 25.10.2018 in your electronic credit ledger through GSTR – 3B (whether filed for FY 2017-18 or FY 2018-19 till September, 19) ?
c. If not claimed as above, have you confirmed whether the invoices/debit notes pertaining to FY 2017-18 for which ITC is yet to be claimed (as on 25.10.2018) has been uploaded by the supplier in GSTR – 1 ?
d. If the said invoices appears in your GSTR-2A the presumption is that the vendor has uploaded the invoices/debit notes. If the same does not appear in GSTR-2A, have you communicated to the concerned supplier to include the same in GSTR-1 to be filed till 11.04.2019 ?
e. If the supplier claims to have uploaded the invoices/debit notes but the same still do not appear in your GSTR-2A, have you taken confirmation from the supplier of having included the relevant invoices/debit notes in GSTR -1 (remember that the condition is that the supplier should have uploaded the details and not that the same should appear in your GSTR-2A) ?
15. Above steps will help in identifying the necessary actions which are to be taken in the current month.
16. It may also be noted that as per the current format of GSTR-9 (Annual Return), ITC claimed between 26.10.2018 and 20.04.2019 for FY 2017-18 will appear in the GSTR-9 for FY 2018-19 and not FY 2017-18. This appears to be comical given that the figures in the GSTR-9 will have to be reconciled with the books of accounts.
17. At this juncture can we thus say that the reconciliation of ITC claimed with the that appearing in GSTR-2A is not required if such ITC has been claimed on or before 25.10.2018 ?
18. This is because the Press Release dated 18.10.2018 (supra)says that GSTR-2A matching is not legally required for claiming the credit. However it also says that conditions stipulated u/s 16 should be met. Now one of the condition stipulated u/s 16(2)(c) is that the tax in respect of which ITC is claimed should have been actually paid by the concerned supplier. Three aspects needs to be considered pertaining to this condition.
19. First is whether the said provision is constitutionally valid ? Readers may refer to the decision of Hon. Delhi High Court in the case of Arise India (W.P.(C) 2106/2015) wherein similar condition prevalent under the DVAT Act, 2004 has been read down and made applicable only in cases where there is ex-facie evidence of evasion. Department’s appeal against the said decision has also been dismissed by the Apex Court (Special Leave to Appeal (C) No(s). 36750/2017). Hence even the condition stipulated u/s 16(2)(c) will have to be tested before the Courts to determine its validity.
20. Second interesting aspect involved here pertains to debit note. It may be noted that the time limit for claiming credit even on the debit note is determined on the basis of the date of the original invoice. Hence if the debit note (let us assume for interest on late payment) is issued on or after 01.04.2018 in respect of invoice issued on or before 31.03.2018, the time limit for claiming the ITC in respect of such debit note shall still be 20.04.2019 (what would happen if debit note for invoice of FY 2017-18 is issued after 31.03.2019 since Sec. 34(3) prescribes no time limit ?).
21. Third aspect to consider is that even if the taxpayer wants to comply with the said condition, where is the mechanism to comply ? This is because GSTR-1, 2 & 3 system (which would have enabled compliance with the actual payment condition) has been suspended.
22. Without prejudice to the above reservations, can it be said that the tax has been actually paid merely because the concerned invoice appears in GSTR-2A ? Answer may not be easy given that there is no legal requirement to reconcile GSTR-1 (which is the basis for GSTR-2A) with GSTR-3B (through which tax is paid). Hence it is possible that the supplier would have uploaded the details in GSTR-1 but not paid the tax through GSTR-3B. Even otherwise reflection in GSTR-3B would not confirm that the tax has been actually paid by utilizing “admissible” credits.
23. Notwithstanding the above aspects, it is always advisable to even do the reconciliation of ITC claimed on or before 25.10.2018 for FY 2017-18 with GSTR-2A. Any gaps found should be immediately intimated to the concerned supplier so that the same can be included in GSTR-1 which is to be filed till 11th April, 2019. This shall go a long way in shifting the onus on the department to prove that tax has not been paid even if the invoice/debit note is reflected in 2A.
24. Even though the proviso has been inserted u/s 37(3) in the context of Sec. 16(4), an advantage of the same can be taken to make any rectifications in GSTR-1 pertaining to the invoices/debit notes of FY 2017-18 to ensure that the rectified data tallies with the books of accounts.
25. We can thus conclude by saying that a lot of match-making is required to be done in the current month pertaining to the transactions of FY 2017-18. Such match-making can avoid lots of future troubles.
(views are strictly personal)