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Relief for Input Tax Credit (ITC) claimed for unmatched invoices in GSTR 2A for FYs 2017-18 and 2018-19

Taxpayers have been flooded with notices demanding GST on Input Tax Credit (ITC) claimed by them in their GSTR 3B for invoices not auto-populating in GSTR 2A for the FYs 2017-18 and 2018-19. Just to put things in perspective, GSTR 2A was made available only from sometime in September 2018 and the requirement of matching ITC and availing the same upto an extra 20% came only with effect from 9th October 2019. Thus practically till September 2018 no GSTR 2A was available on a month on month basis and the legal requirement to match invoices in purchase register with GSTR 2A came only in October 2019, when the tax payers understood the real importance of availing ITC only after matching the same with GSTR 2A. GSTR 2A for FYs 2017-18 and 2018-19 was subsequently made available on the portal sometime in end of 2018-19.

The Department had also issued a Press Release dt. 18-10-2018when GSTR 2A was initially introduced and figures appeared in GSTR 9 Table 8A for the FY 2017-18, stating that GSTR 2A was only a facilitator and does not impact the ability of the tax payer to avail ITC on self-assessment basis in consonance with the provisions of section 16 of the Act. The Hon’ble Supreme Court in the Bharti Airtel matter had also clarified that ITC needs to be availed based on tax payers’ purchase records and not based on invoices auto-populated in GSTR 2A. Thus, it was widely expected that the Department will show some relaxation and will be lenient in raising demand for the differences in GSTR 3B and GSTR 2A for the initial years. However the Scrutiny Guidelines and flurry of Notices on the subject poured cold water on the high expectations of the Tax payer. Such differences are being considered by the tax officers as ineligible ITC and are being flagged seeking explanation from the tax payers for such differences and/or for reversal of such ITC. What followed was series of demands, litigation, High Court orders (some in favour of the Tax payer), etc.

The Department has now taken note of the difficulties being faced by the Tax payer and the 48th GST Council in its meeting held on December 17, 2022 decided to provide a mechanism so as to verify the claim of ITC for such invoices and if found eligible, to provide relief. Pursuant to the decision, a Circular no. 183/15/2022-GST dt. 27th December, 2022 was issued. The Circular has listed down some of the reasons for which invoices were not auto-populated in GSTR 2A. These are as follows:

1. B2B transactions were reported as B2C by the suppliers in their GSTR 1;

2. Suppliers reported incorrect GSTIN in their GSTR 1;

3. Taxable value/ Tax amount was reported incorrectly by the suppliers in their GSTR 1; and

4. Suppliers failed to upload GSTR 1.

In all these cases and any other case not listed above, it should be noted that GSTR 3B should be duly uploaded and tax duly paid on the transaction. Thus the following cases are excluded from the purview of this Circular:

1. GSTR 3B has not been uploaded and tax has not been paid on the transaction;

2. GSTR 3B has been uploaded but tax has not been paid on the transaction e.g. supplier has filed a NIL return and tax has not also been paid in subsequent GSTR 3B;

3. If supplier had not furnished invoice details for 2017-18 in GSTR-1 till the due date for the month of March, 2019, for the claim of ITC made in the GSTR-3B return filed after the due date for September, 2018 return till the due date for March, 2019 return;

4. The transaction is a fake transaction i.e. without actual supply of good or services or both; and

5. Proceedings in instant cases have been completed for FYs 2017-18 and 2018-19.

The basic conditions that needs to be followed before availing relief under this Circular is as follows:

1. The tax payer is in possession of Tax Invoice/ Debit Note;

2. The tax payer has received the goods or services or both;

3. The tax payer has paid the supplier in compliance of the requirements of second proviso to section 16(2) i.e. payments have been done within 180 days;

4. ITC has been availed within the time allowed u/s 16(4) i.e. March 2019 return (in case of FY 2017-18) and Sep 2019 return (in case of FY 2018-19); and

5. Proceedings are ongoing and have not completed in scrutiny/ audit/ investigation, etc. including where any adjudication or appeal proceedings are still pending.

The salient features of the Circular are as follows:

1. The Circular is applicable only for the FYs 2017-18 and 2018-19 when the availability of GSTR 2A was in its initial stages;

2. The proper officer shall first seek the details from the registered person regarding all the invoices on which ITC has been availed by the registered person in his GSTR 3B but which are not reflecting in his GSTR 2A;

3. In order to verify the condition of clause (c) of sub-section (2) of Section 16 of CGST Act that tax on the said supply has been paid by the supplier, the following action may be taken by the proper officer:

i. In case the difference between ITC claimed as per GSTR 3B and as those auto-populated as per GSTR 2A is more than Rs. 5 lakhs per supplier for a FY, a certificate from a CA/ CMA certifying that supplies have actually been made and that payment of GST has been done, is required. The certificate shall be verifiable on UDIN site of the respective Institutes; and

ii. In case the difference between ITC claimed as per GSTR 3B and as those auto-populated as per GSTR 2A is upto Rs. 5 lakhs per supplier for a FY, a self-certificate from the supplier certifying that supplies have actually been made and that payment of GST has been done, is required.

4. The proper officer shall check whether any reversal of input tax credit is required to be made in accordance with section 17 or section 18 of CGST Act, 2017; and

5. In case the suppliers reported incorrect GSTIN in their GSTR 1, in addition to the procedure above, the proper officer of the actual recipient shall intimate the concerned jurisdictional tax authority of the registered person, whose GSTIN has been mentioned wrongly, that ITC on those transactions is required to be disallowed, if claimed by such recipients in their GSTR-3B. However, allowance of ITC to the actual recipient shall not depend on the completion of the action by the tax authority of such registered person, whose GSTIN has been mentioned wrongly, and such action will be pursued as an independent action.

In a recent judgment of the Hon’ble Karnataka High Court, in the matter of Wipro Limited India Vs Assistant Commissioner of Central Taxes Writ Petition No. 16175 of 2022 (Date of Judgement/Order : 06/01/2023), it has been held that the in case of identical errors, the benefit of the Circular should also be available for 2019-20. The judgment thus paves the way for seeking benefit of the Circular not only for 2017-18 and 2018-19 (which is as mentioned in the Circular), but for other years too, in cases where the issues are identical.

It is expected that tax payers who are facing difficulties for their genuine transactions wherein they have paid the tax but are being denied ITC because of no fault of theirs will be hugely benefitted by this Circular. This Circular is in the right direction in making GST a Good and Simple Tax.

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  1. Ayush says:

    If the supplier is not available now, what’s the procedure since the claimant of ITC has entered into a genuine transaction but it’s the suppliers fault that he had not deposited tax.

    1. Tarun Kumar Gupta says:

      Dear Ayush ji thank you for writing to me. As a response to your query, the situation mentioned by you is not covered in this Circular. This Circular provides limited relief to purchasers who can get the declaration from their suppliers and get the relief. In case declaration cannot be provided, relief under this Circular is not available. One has to go with the jurisprudence of GST law is circumstances mentioned by you.

  2. NILESHKUMAR says:

    CA/CMA certificate is required from the supplier’s agency which is very difficult . A CA/CMA who is independent to issue Certificate and the certificate must be stating that the tax on such invoices are paid to the Govt account, other wise there will be again litigation inflow. Please through some light on it.

    1. Tarun Kumar Gupta says:

      Please note that it is only the Supplier who can confirm whether tax has been paid or not, as mere filing of GSTR 3B does not confirm payment of tax. Thus the Supplier’s CA/ CMA only has to seek details from the Supplier and confirm payment of tax. There is no other way in my opinion.

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April 2024