Article explains Section 41 to 48 of Central Goods & Services Tax Act, 2017 which deals with Claim of input tax credit and provisional acceptance thereof, Matching, reversal and reclaim of input tax credit, Matching, reversal and reclaim of reduction in output tax liability, Annual return, Final return, Notice to return defaulters, Levy of late fee and Goods and services tax practitioners.

Section 41- Claim of input tax credit and provisional acceptance thereof

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.

(2) The credit referred to in sub section (1) shall be utilised only for payment of self-assessed output tax liability as per the return referred to in the said sub-section.

Analysis– All registered persons shall be eligible to avail eligible input tax credit on self-assessment basis. Amount availed as input tax credit on self-assessment basis, shall be credited to his electronic credit ledger on a provisional basis and this self-assessed input tax credit can be utilised for making payment of self-assessed output tax only (other than inward supplies liable to tax under reverse charge).

Section 42. Matching, reversal and reclaim of input tax credit

(1) The details of every inward supply furnished by a registered person (hereafter in this section referred to as the “recipient”) for a tax period shall, in such manner and within such time as may be prescribed, be matched-

(a) With the corresponding details of outward supply furnished by the corresponding registered person (hereafter in this section referred to as the “supplier”) in his valid return for the same tax period or any preceding tax period,

(b) with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him, and

(c) for duplication of claims of input tax credit 

(2) The claim of input tax credit in respect of invoices or debit notes relating to inward supply that match with the details of corresponding outward supply or with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him shall be finally accepted and such acceptance shall be communicated, in such manner as may be prescribed, to the recipient.

 (3) Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of the tax declared by the supplier for the same supply or the outward supply is not declared by the supplier in his valid returns, the discrepancy shall be communicated to both such persons in such manner as may be prescribed.

 (4) The duplication of claims of input tax credit shall be communicated to the recipient in such manner as may be prescribed.

(5) The amount in respect of which any discrepancy is communicated under subsection (3) and which is not rectified by the supplier in his valid return for the month in which discrepancy is communicated shall be added to the output tax liability of the recipient, in such manner as may be prescribed, in his return for the month succeeding the month in which the discrepancy is communicated.

 (6) The amount claimed as input tax credit that is found to be in excess on account of duplication of claims shall be added to the output tax liability of the recipient in his return for the month in which the duplication is communicated. 

Analysis-

1. This provision relates to matching, reversal and reclaim of input tax credit.

2. Provisions of section 42 are not applicable now due to deferment of GSTR-2 and GSTR-3

3. The matching of input tax credit and verification of output tax liability would still be done on the basis of GSTR 1 and GSTR-2A

Case 1- All Transactions where Input credit details of recipient are matched for output tax as stated by supplier and recipient

Solution– The transaction is treated as matched. 

Case 2- Transactions where the claim of input tax credit is made more than once (Duplication of claims)

Solution- Details of such discrepancy shall be communicated to the registered person.

Case 3- Transactions where the claim for input tax credit is higher than the output tax as declared by the supplier.

Solution- If discrepancy is due to supplier’s mistake and accepts it, can correct it in GSTR 1 of that month (results in increase in output liability in the hands of supplier) but If discrepancy is due to recipient’s mistake and accepts it, can correct it in statement of inward supply for that month (results in reduction in input tax credit in the hands of recipient but if the same is not rectified by both of them, such amount will get added to output tax liability of such recipient and the said amount is payable along with applicable interest (section 50(1) of CGST Act, 2017).

(7) The recipient shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5), if the supplier declares the details of the invoice or debit note in his valid return within the time specified in sub-section (9) of section 39.

(8) A recipient in whose output tax liability any amount has been added under subsection (5) or sub-section (6), shall be liable to pay interest at the rate specified under subsection (1) of section 50 on the amount so added from the date of availing of credit till the corresponding additions are made under the said sub-sections.

 (9) Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8) shall be refunded to the recipient by crediting the amount in the corresponding head of his electronic cash ledger in such manner as may be prescribed

Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the supplier.

 (10) The amount reduced from the output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the recipient in his return for the month in which such contravention takes place and such recipient shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.

Analysis- For Instance there is mismatch in the amount of input tax credit availed and amount of tax paid by the supplier on the particular tax invoice, the discrepancy will be made available to recipient through common portal. Who should rectify the mistake??

  • Whether the supplier shall make rectification in their GSTR 1 or the recipient shall make rectification in Form GSTR 2
  • In such a situation, if the supplier has committed the error and corrects it in his GSTR 1 to the said extent there will be increase in his output tax, along with applicable interest. Similarly, if the error has been committed by the recipient and he corrects it in Form GSTR 2, then to the said extent there will be reduction in the amount of input tax credit available for payment of taxes.
  • However, if neither the supplier nor the recipient rectifies the discrepancy, then the difference amount will get added to the output tax liability of the recipient of supply in his return in FORM GSTR-3 / GSTR 3B as the case may be.
  • However, if the supplier declares the invoice or debit note in any subsequent month but before the time limit prescribed recipient will also be eligible for refund of interest paid earlier and the said amount will get credited to electronic cash ledger under the head of interest and can be utilised for any payment towards interest in future.

Section 43Matching, reversal and reclaim of reduction in output tax liability 

(1) The details of every credit note relating to outward supply furnished by a registered person (hereinafter referred to in this section as the ‘supplier’) for a tax period shall, in such manner and within such time as may be prescribed, be matched –

(a) with the corresponding reduction in the claim for input tax credit by the corresponding registered person (hereinafter referred to in this section as the ‘recipient’) in his valid return for the same tax period or any subsequent tax period, and

(b) for duplication of claims for reduction in output tax liability . 

(2) The claim for reduction in output tax liability by the supplier that matches with the corresponding reduction in the claim for input tax credit by the recipient shall be finally accepted and communicated, in the manner as may be prescribed, to the supplier. 

(3) Where the reduction of output tax liability in respect of outward supplies exceeds the corresponding reduction in the claim for input tax credit or the corresponding credit note is not declared by the recipient in his valid returns, the discrepancy shall be communicated to both such persons in the manner as may be prescribed.

(4) The duplication of claims for reduction in output tax liability shall be communicated to the supplier in such manner as may be prescribed.

(5) The amount in respect of which any discrepancy is communicated under sub-section (3) and which is not rectified by the recipient in his valid return for the month in which discrepancy is communicated shall be added to the output tax liability of the supplier,in such manner as may be prescribed, in his return for the month succeeding the month in which the discrepancy is communicated. 

(6) The amount in respect of any reduction in output tax liability that is found to be on account of duplication of claims shall be added to the output tax liability of the supplier in his return for the month in which such duplication is communicated. 

Analysis- This provision relates to matching, reversal and reclaim of output tax liability due to discrepancy in the output tax reduced by the supplier by way of issuing credit note and corresponding reduction of input tax credit by the recipient. The provisions of section 43 are not applicable till now as GSTR-2 & GSTR-3 suspended. But still revenue authorities will verify reduction in output liability and reduction in corresponding ITC through GSRT-1  GSTR-2A AND GSTR-3B

1. Issuance of Credit note for reduction in output tax liability: Where the output tax is reduced by the supplier by way of issuing a credit note, a detail of every such credit note issued is to be matched with the corresponding reduction in the credit by the recipient. For example: a supply invoice was originally issued at ` 150,000 was overstated by ` 50,000, to that effect a credit note is issued by the supplier (along with tax). This credit note is to be accepted by the recipient and should result in reduction of input tax credit to the said extent in the return furnished by the recipient of the supply.

2. Reduction in output tax liability due to duplication of output liability-Similarly, where the supplier has paid taxes twice on a particular supply by issuing tax two tax invoices or otherwise and a credit note is issued to rectify the said error, the recipient of supply shall reduce his input tax credit (only if availed credit twice) in the tax period in which such credit note is issued by the supplier.

3. Consequences of duplication ,liability to pay interest, refund of interest paid earlier are same as explained by me in Section 42.

Section 44 –Annual return-

(1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed. 

Analysis- This section applies to all registered taxable person other than person registered as-

  • An Input Service Distributor;
  • A person liable to deduct tax under Section 51 (TDS)
  • A person liable to deduct tax under Section 52 (TCS)
  • A casual tax Taxable person; and
  • Non-resident taxable person. 
  • Due date for filing Annual Return is on or before 31st December, following the end of the financial year to which the said Annual return is to be submitted. 
  • Due date for GSRT-9 & 9A (Annual return for regular and composition taxpayers) for F.Y 2018-19 has been extended till 30.09.2020.
  • Every person, whose aggregate turnover exceeds ` Five crores, who is required to get his accounts audited in terms of section 35(5) of this Act, shall in addition to annual return in 9, 9A as the case may be, furnish a copy of audited financial statements along with reconciliation statement in Form GSTR 9C, electronically.
  • Due date for GSRT-9C for F.Y 2018-19 has been extended till 30.09.2020.

Section 45- Final return

Every registered person who is required to furnish a return under sub-section (1) of section 39 and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed. 

Analysis- This section applies to all registered taxable person other than persons registered as,

— Input Service Distributor;

— A person paying tax under Section 51 (TDS)

— A person paying tax under Section 52 (TCS)

— Non-resident taxable person; and

— A person paying tax under Section (10) composition levy.

Every registered person whose registration is cancelled (suo moto or on an application made by applicant i.e., voluntary cancellation) shall file a final return in FORM GSTR-10 through the common portal within 3 months from the date of cancellation (in case of voluntary cancellation) or date of order of cancellation (forceful cancellation by authority), whichever is later.

Section 46- Notice to return defaulters

Where a registered person fails to furnish a return under section 39 or section 44 or section 45, a notice shall be issued requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.

Analysis-   Notice to defaulter

Notice in FORM GSTR–3A shall be issued electronically to a registered person, who has failed to file return(s) under 39 (monthly return) and under section 44 (annual return) or Section 45 (final return) requiring him to file all such return(s) within 15 days from the date of serving of notice.

Section 47- Levy of late fee

(1) Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or section 38 or returns required under section 39 or section 45 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.

(2) Any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter per cent. of his turnover in the State or Union territory.

Analysis- 

Return Late fee under CGST/SGST/UTGST LAW Revised late fee under each CGST & SGST / UTGST Law
Details of Outward Supplies –GSTR-1 Rs 100 per day of delay with cap on maximum late fee of ` 5,000 `Rs 25 per day each under CGST /SGST of delay (maximum of ` 5,000)

In case of NIL return – ` 10 per day of delay maximum of ` 5000

GSTR-3B/Composition dealers Same as above Same as above
Annual Return (Sec 44) 100 per day of delay with cap on maximum amount = 0.25% on turnover in the state / UT No revision

Note- Presently due to COVID-19 crisis  LATE FEES WAIVED OFF FOR NIL RETURN from JULY 2017-JULY 2020 and for Taxpayers having tax liability Rs 500 per return but returns to be filed till 30.09.2020

Section 48- Goods and services tax practitioners

(1) The manner of approval of goods and services tax practitioners, their eligibility conditions, duties and obligations, manner of removal and other conditions relevant for their functioning shall be such as may be prescribed.

(2) A registered person may authorise an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45 and to perform such other functions in such manner as may be prescribed.

(3) Notwithstanding anything contained in sub-section (2), the responsibility for correctness of any furnished in the return or other details filed by the goods and services tax practitioners shall continue to rest with the registered person on whose behalf such return and details are furnished.

 Analysis- A GST practitioner can undertake any or all of the following activities on behalf of a registered person, if so authorised by the registered person-

  • furnish details of outward and inward supplies;
  • furnish monthly, quarterly, annual or final return
  • make deposit for credit into the electronic cash ledger
  • file a claim for refund;
  • file an application for amendment or cancellation of registration.
  • The procedure as prescribed in Rule 83 of CGST Rules, 2017 supra, is to be followed to enrol as a Goods and Services Tax Practitioner (GSTP). The eligibility and disqualifications from enrolment as GSTP is also provided in the said rule.

Note- Rules related to Returns –Rule 59 to Rule 84 referred to. 

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