Due date to file Annual Return GSTR-9 for 2018-19 is 30-09-2020. The following queries are being raised.
1. How deal with reverse charge liability pertaining to 2018-19, in annual return GSTR-9 to be filed for 2018-19, which (reverse charge liability) had not been paid till date or had been paid in the year other than 2018-19.
2. Whether input tax credit can be availed if reverse charged liability pertain to 2018-19 is paid either through DRC-03 or through current GSTR-3B return.
Q 1. There are two options to declare reverse charge liability if not paid in 2018-19: –
Option No.1 – Show reverse charge liability in column no. 4(G) of annual return GSTR-9 pertain to 2018-19 and pay such liability through DRC-03 with interest. Under this option reverse charge shall be paid but a question before us whether on such payment input tax credit can be availed. There is no such provision come to notice which allow to avail input tax credit on payment of reverse charge liability through DRC-03. Therefore, reverse charge liability for 2018-19 which was not earlier paid, may be paid through DRC-03 with interest but input tax credit shall not be availed in this case.
Option No.2 – Pay the reverse charge liability pertain to 2018-19 in any year other than year 2018-19. The person can pay such liability in the year 2019-20 or 2020-21. Then such RCM liability should be declared in the Annual Return GSTR-9 of the year in which year such RCM liability had been paid. For example, if reverse charge liability pertains to 2018-19 was paid in the year 2019-20 then such liability shall be declared in the Annual Return 2019-20. Likewise, if the RCM liability for the year 2018-19 is paid in 2020-21 then such liability shall be declared in the Annual Return 2020-21. The same clarification has been given in para (g) of the press release dated 03-07-2019 issued by the CBIC. The same is reproduced as under: –
Press Release 03-07-2019 para (g) – Reverse charge in respect of Financial Year 2017-18 paid during Financial Year 2018-19: Many taxpayers have requested for clarification on the appropriate column or table in which tax which was to be paid on reverse charge basis for the FY 2017-18 but was paid during FY 2018-19. It may be noted that since the payment was made during FY 2018-19, the input tax credit on such payment of tax would have been availed in FY 2018-19 only. Therefore, such details will not be declared in the annual return for the FY 2017-18 and will
be declared in the annual return for FY 2018-19. If there are any variations in the calculation of turnover on account of this adjustment, the same may be reported with reasons in the reconciliation statement (FORM GSTR-9C).
Q 2. Further question is arising that can the registered person avail Input Tax Credit for reverse charge liability pertaining to 2018-19 which was paid in the year other than 2018-19?
To understand this query, we take one example as follow:
A person availed advocate services in the year 2018-19 and paid advocate fee Rs.2 lakh in the month of March of the year 2018-19. Such legal expenses had been accounted for in the books of account and taken in profit and loss account in the year 2018-19. But RCM liability of Rs.36000.00 was neither accrued in the books of the year 2018-19 nor paid in the year 2018-19. The person shows this RCM liability in the 3B return of July 2020 filed in August 2020 and paid such liability with interest. The query raised by him whether he can avail input tax credit Rs.36000.00 in 3B return of July 2020 for the RCM liability pertain to the year 2018-19.
There are no disputes, in regard to the above stated example, as under: –
1. Time of Supply for that transaction was in the month of March 2019;
2. Tax Liability was to be discharged in the month of April 2019 through return GSTR-3B of March 2019;
3. That Liability was paid in the month of August 2020 through GSTR-3B return of July 2020 with interest;
4. Self-Invoice is to be issued as per section 37(1)(f) in the month of March 2019 because service was received from unregistered person and
5. Such RCM liability should be declared in the Annual Return GSTR-9 of 2020-21 according to clarification given in press release dated 03-07-2019.
Liability to pay reverse charge liability and availing of input tax credit should be considered and treated as two different terms under the GST Law. The person cannot take the plea that there is no revenue loss if he had not paid the RCM liability because if he pays RCM liability then the same time, he will avail input tax credit. The person further says that there is no gain as well as no loss to the GST Department either in the case of payment of reverse charge liability or in the case of non-payment of reverse charge liability. But actual this is not the case. Collection or recovery of tax shall be done through their respective provisions and for availing input tax credit one should have to consider their respective provisions. Therefore, both i.e. payment of reverse charge liability and availing of input tax credit are different terms under the GST Law. It is not necessary if the person pays reverse charge liability, he is eligible for availing input tax credit. He may not be eligible if provisions of the GST do not allow him to avail such credit.
Before answer to the query whether input tax credit can be availed in the GSTR-3B return of July 2020 or not, we analysis provisions of input tax credit relating to the RCM Liability as under:
1. Section 2(62) of the CGST Act includes “the tax payable under the provisions of sub-sections (3) and (4) of section 9 i.e. reverse charge liability” in the definition of “Input Tax”
2. Rule 36(1)(b) says “The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely, —
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax;
3. Section 31(3)(f) says “a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both.”
4. Self-Invoice should be issued on the day of receipt of services. It means the self-invoice must be issued in the above example in the month of March 2019.
5. Other provisions as stated under section 16 shall also be applied for availing input tax credit under the case of reverse charge liability.
Answer to the query is given on two different cases: –
1. Self-Invoice was issued in the month of March 2019 according to section 31(3)(f) but the same was not considered in the March 2019 GSTR-3B return to be filed in April 2019.
2. Other Case is that self-invoice to be issued in the month of March 2019 was issued in the month of July 2020.
First Case self-invoice issued but not considered in the GSTR-3B Return of March 2019 filed in April 2019 and the same was considered in August 2020.
According to section 16(4) input tax credit can be availed pertaining to 2018-19 maximum by the due date of furnishing of the return under section 39 for the month of September 2019. That due date was 20-10-2019. Thus, in the first case input tax credit for the tax invoice of March 2019 cannot be availed in the month of August 2020.
In second case self-invoice was issued in July 2020 and tax was also paid in August 2020 with interest. In this second case there are no disputes that
1. The invoice was not issued within time as stipulated under section 31(3)(f). This section says the invoice should be issued on the date of receipt of goods or services or both. Therefore, the invoice should have been issued in the month of March 2019 for the above stated example;
2. Rule 36(1)(b) allows to avail input tax when the invoice issued in accordance with provisions of section 31(3)(f) and payment of tax had been made;
3. Thus, two conditions must be fulfilled to avail input tax credit towards tax paid for discharging the reverse charge liability. One condition is invoice be issued in accordance with provisions of section 31(3)(f) and other condition is tax had been paid. But the condition for issuance of invoice was not done in accordance with the provisions of section 31(3)(f) because the invoice was issued in July 2020 instead of to be issued in the month of March 2019. Therefore, when conditions are not being fulfilled how the input tax credit can be availed.
4. Press Release dated 03-07-2020 just clarifying to declare RCM liability in the Annual Return of that year in which year RCM liability was paid. Press Release is not clarifying on the issues about input tax credit which was not availed in the relevant year and self-invoice was not issued timely.
Thus, my conclusion is that if the RCM liability pertain to the year 2018-19 had not been paid till date then that person should declare such entry in Annual Return GSTR-9 for the year 2018-19 and pay such liability with interest through DRC-03. Input tax Credit shall not be availed on such transaction.
And if the person had paid RCM liability pertain to the year 2018-19 in any year other than 2018-19 then he should declare such entry in the Annual Return of that year in which year such liability had been paid.
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