Timely Needed to Study Circumstances of Input Tax Credit- Take, Claim, Utilised, Availed, Wrongly Take or Utilised or, Wrongly Take and Utilised or, Wrongly Availed or Utilised, Wrongly Availed and Utilised Under the Goods And Services Tax Act 2017

IT IS TIMELY NEEDED TO STUDY AND TO DETERMINE THE PROPER SECTION AND STAGE OF APPLICABILITY , REMEDY, INCLUDING WHEN SUCH OFFENSE ATTRACT, UNDER THE ACT.

We must know the following before we study the GST Act.

For the sure and true interpretation of all statutes in general four things are to be discened and considered:

FIRST: what was the common law before the making of   the Act,

Second: what was the mischief and defect for which the common law did,  Did not provided,

Third : What remedy the parliament hath resolved and appointed to  Cure the disease of the common wealth, and

Fourth : The true reason of the remedy.

Input Tax Credit on black note

WHAT  WAS THE COMMON LAW BEFORE THE MAKING OF THE ACT

WHAT  WAS THE COMMON LAW BEFORE  MAKING OF THE CGST/SGST/UTGST ACT:

Under the erstwhile CENVAT Credit Rules, 2004, Rule 14 prior to 01.04.2012 provided for recovery of CENVAT Credit that has been “CENVAT Credit has been taken or utilized wrongly .

To put an end to this controversy,  The said Rule 14 was amended with effect from 01.04.2012 to provide for recovery of CENVAT Credit that has been wrongly taken and utilised or has been erroneously refunded. Under the CENVAT Rule, such offences were attracted interest.

Interest must be of compensatory character :

The Principles of collection of interest in fiscal statutes as laid down by the Hon’ble Supreme Court in the case of :

Prathiba Processors v Union of India  [1996 (88) ELT 12 (SC)]

In the said landmark judgment of Supreme Court, the essential principle laid down with respect to collection of interest is that, it must be compensatory in character and can be imposed only when the assessee withhold any tax amount when it is due and payable

Hence the interpretation of interest arise, whether  is leviable either on ITC wrongly taken or in the case of wrongly utilised, which  relates earlier to the amended CENVAT Rule 2012.  The land mark judgment of Supreme court is:

Union of India vs Ind-Swift Laboratories Limited  [2011 (265) ELT (SC)]

The respondents therein availed CENVAT Credit based on fake invoices from 01.04.2001 to 31.03.2006. The availed CENVAT Credit was utilised for payments or claimed refund in the months of February 2006, March 2006 and November 2006. Considering the said fact pattern, the Commissioner was of the view that the appropriate interest liability has to be borne by the Respondent on such wrongful availment of CENVAT credit. Pursuant to the Settlement Commission order, revenue has calculated the interest liability from the date of availment..

Aggrieved the settlement order,  the respondent approached  the Punjab and Haryana High Court

wherein it was held that Rule 14 has to be read down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable on the CENVAT credit from the date the said credit had been utilized wrongly

Aggrieved by this order, the Revenue approached the Honourable Supreme Court , wherein it was held  that If the aforesaid provision is read as a whole we find no reason to read the word “OR” in between the expressions ‘taken’ or ‘utilized wrongly’ or has been erroneously refunded’  as the word “AND”. On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest.

After the decision of the Honourable Supreme Court in the matter of Ind-Swift Laboratories Limited,  the Honourable Karnataka High held that in the case of:

CCE  vs  Bill Forge Private Limited (Respondent)

wherein the respondent availed CENVAT Credit wrongly on Capital Goods before their actual receipt. Upon pointing the lapse, the same was reversed without utilisation. The revenue demanded interest from the date of availment of CENVAT Credit which was struck down by CESTAT.

(please note that  identical issue in Section 16(2)(b) under the CGST Act)

In this context, the Karnataka High Court held that mere wrong availment of CENVAT Credit is different from CENVAT Credit that was wrongly taken or wrongly utilised.

The Honourable Karnataka High Court has referred to Prathiba Processors Limited case.

In the case of  CCE vs Sundaram Fasteners Limited [2014 (304) ELT 7 (Mad)] [Judgment  rendered on 30-1-2014] the  Honourable Madras High Court held that  :

The facts involved are that CENVAT Credit was availed on CTD bars used in construction of foundation for machinery. The availed CENVAT Credit was reversed without utilisation.  The Madras High Court by relying on Ind-Swift Laboratories Limited (supra) held that interest is payable from the date of availment.

Whereas within a short period, in the case of  CCE vs Strategic Engineering (P) Ltd [2014 (310) ELT 509 (Mad)] [Judgment rendered on 10-2-2014]   the  Madurai Bench of the Madras High Court held that

The Court relied on decision of the honourable Karnataka High Court in the matter of Bill Forge Private Limited (supra) and held that interest is not payable when the CENVAT Credit was merely availed but not utilised.

Again, in the case of  CCE vs Sri Kumaran Alloys (P) Ltd the Honourable Madras High Court held that

In this case the Respondent was claiming SSI exemption and availed CENVAT Credit on capital goods received from July, 2008 to March, 2009 and the CENVAT credit taken was kept in balance in their CENVAT credit account in March, 2009 and carried over up to March, 2011. The Department proceeded to recover interest from the date of availment.

The Honourable Madras High Court held that an amendment to a statute done prospectively cannot be interpreted to be an answer to doubts which had arisen earlier to the amendment. Thus, we are not persuaded to apply the decision in Strategic Engineering (P) Ltd. (supra)

When the wrongly availed credit is reversed before utilising the same, whether interest liability would arise in respect of the same or not?

In the case of  J.K.Tyre and Industries Limited vs Asst. Commissioner  of Central Excise  [2016 (340) E.L.T. 193 (Tri. – LB)] the larger bench of CESTAT  instead of addressing the issue involved by answering the above question of law, held that in case of contrary High Court decisions including the one of the Jurisdictional High Court, the decision of the Jurisdictional High Court is required to be followed and accordingly  followed the decision of Honourable Karnataka High Court in Bill Forge Private Limited (supra) and held that interest is not payable.

In the case of CCE vs Vandana Vidyut Limited [2016 (331) E.L.T. 231 ] (Chhattisgarh), The Chhattisgarh High Court held that the  Chhattisgarh High Court  has disagreed  with the view of Honourable Karnataka High Court in Bill Forge Private Limited (supra)

The above decision of Chhattisgarh High Court in appealed before the Honourable Supreme Court and the matter is pending for disposal.

Accordingly, the entire controversy has landed up before the Honourable Supreme Court one more time after Ind-Swift Laboratories Limited.

The amendment to Rule 14 (w.e.f. 01.04.2012) is clarificatory in nature having retrospective implications or not is to Decided by Court.

It was argued in several cases that the amendment is clarificatory in nature and is retrospective. Some of these cases are decided in favour of the assessee while others are against. Therefore, the issue whether the amendment is clarificatory in nature having retrospective implications or not is also not yet decided.

Cenvat Credit Rules 2004

Rule 2: Definition

(l) “input service” means any service,-

 (i) used by a provider of taxable service for providing an output service; or

 (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place  of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

Rule 3. CENVAT credit. –

(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –

……..

(4) The CENVAT credit may be utilized for payment of –

a) any duty of excise on any final product; or

b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or

c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or

d) an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002;or

e) service tax on any output service:

Rule 4. Conditions for allowing CENVAT credit

Rule 5.Refund of CENVAT credit. –

Rule 5A. Refund of CENVAT credit to units in specified areas.

Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.-

(1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2).

…..

(3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:-

(a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:-

 (i) name, address and registration No. of the manufacturer of goods or provider of output service;

 (ii) date from which the option under this clause is exercised or proposed to be exercised;

 (iii) description of dutiable goods or taxable services;

(iv)description of exempted goods or exempted services;

(v)CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,-

Rule 7. Manner of distribution of credit by input service distributor. –

Rule 7A. Distribution of credit on inputs by the office or any other premises of output service provider.-

Rule 8. Storage of input outside the factory of the manufacturer

Rule 9. Documents and accounts.-

(1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-

Rule 9A. Information relating to principal inputs.-

(1) A manufacturer of final products shall furnish to the Superintendent of Central Excise, annually by 30th April of each Financial Year, a declaration in the Form specified, by a notification, by the Board,

Rule 10.  Transfer of CENVAT credit.

Rule 11. Transitional provision

Rule 12. Special dispensation in respect of inputs manufactured in factories located in specified areas of North East region, Kutch district of Gujarat, State of Jammu and Kashmir and State of Sikkim.

Rule 12A. Procedure and facilities for large taxpayer

Rule 12AA.  Power to impose restrictions in certain types of cases

Rule 13.  Power of Central Government to notify goods for deemed CENVAT credit.

Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.

Rule 15.  Confiscation and penalty.

Rule 15A. General penalty.

Rule 16. Supplementary provision.

Under the CENVAT Rule, the manner of filing returns, we can understand  with the following example:

AT PRESENT

THE CENTRAL GOODS AND SERVICES TAX ACT

Whereas Under the SGST/ CGST  Act, in addition with the above ( Central Excise Act) , the mandatory provisions were prescribed , which begins from the stage of Take the Eligible input tax credit claim Specified in :

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.

ELECTRONIC CREDIT LEDGER UNDER THE CGST ACT

The input tax credit claim credit credited into the Electronic Credit Ledger under the Central Goods and Services Tax, is strictly restricted that,

CGST Rule 86 (5): Prescribed that

“Save as provided in the provisions of this Chapter, no entry shall be made directly in the electronic credit ledger under any circumstance.”

UNFORTUNATELY THE PRESENT GST COMMON PORTAL , IN FORM GSTR3-B, VIOLATING THE RULE 86(5), PERMITS THE REGISTERED PERSONS, MAKE DIRECT ENTRY INTO ELECTRONIC CREDIT LEDGER THOROUGH TABLE-4 ( LIKE A JOURNAL ENTRY), INSTEAD OF, WITHOUT PROVIDING OPPORTUNITY TO CLAIM AT INVOICE LEVEL , TAKE THE ELIGIBLE INPUT TAX CREDIT AND WITHOUT FOLLOWING THE PROVISIONS AND MANNER OF TAKE THE ELIGIBLE INPUT TAX CREDIT PRESCRIBED IN SECTION 38(1) AND SECTION 38(2) OF THE CGST ACT. SUCH ITC CLAIM PROVISIONS AND MANNER OF TAKE THE ELIGIBLE INPUT TAX CREDIT IS MISSING UNDER THE CENVAT ACT AND RULES.

Journey  of – entitled  to “take” the credit of “eligible” input ta

At this junction we raise our own Question and answer: ( please repeat till your doubts cleared}

1. Whether under the CGST Act, anywhere the phrase ” take the credit of eligible input” has been Specifically prescribed other than under section 41(1) and Sec.16.?

2. Under the Central Excise Act/Rule, whether the “credit of  input tax claim, take the eligible ITC  provision and manner” has been prescribed.?

3. Under any State VAT Act, whether the credit of input tax Claim provisions were prescribed .Like Section 19 of TNVAT Act.?

4. Under any State VAT Act, whether the term : Take or/and Utilised the input tax credit has been prescribed. ?

5. Like Cenvat Rule 4 Conditions for allowing CENVAT credit- Eligible, has been prescribed in section 16 of the CGST Act for Eligibility and conditions for taking ITC?.

6. Like , under the head, penalty for certain offences, inclusively “ takes or utilizes ITC”, “ takes or distributes  ITC” in contraventions  of the provisions of this Act or the rules made thereunder,  in clause (vii) or clause (ix) to sub section (1) of Section 122 under the CGST Act, whether  the offence Wrongly taken or/and Utilised  has been used under the CENVAT Rule ? And under Section 122(1) itself prescribed the highest amount of penalty who committed offence under this Section.?

Section 122(1) (vii) of the CGST Act prescribed that “takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

Section 122(1) (ix) of the CGST Act prescribed that “ takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;”.

7. Whether under the CGST Act, in Section 73(1) and 74(1) the conditional term Wrongly availed or Utilised has been prescribed.

UNDER THE CGST ACT, FOR THE PURPOSE OF CLAIM  WHETHER ANY SPECIFIC PROVISIONS WERE PRESCRIBED TO TAKE THE ELIGIBLE ITC?

Answer is YES, SUBJECT TO ITC MATCHING PROVISIONS PRESCRIBED IN SECTION 42 AND 43 OF THE ACT, ON PROVISIONAL BASIS, CLAIM THE ITC, THE MANNER OF TAKE THE ELIGIBLE ITC HAS BEEN PRESCRIBED IN SECTION 38(1), for the purpose of prepare to  furnish the inward supply details.  The registered taxable person shall firstly, select to avail ITC in the tax period and thereafter Elect the eligible ITC to avail in the said tax period,for Claim the credit of input tax credit,  which  BEGINS FROM THE PROVISIONS OF SECTION 37(1) OF THE ACT AT INVOICE LEVEL., and such amount shall credited to the Electronic Credit Ledger under sub section (1) of Section 41.of the  CGST Act.

Sub rule (6) of Rule 86 ( form GST PMT-04) prescribed that  “ A REGISTERED PERSON SHALL, UPON NOTICING ANY DISCREPANCY IN HIS ELECTRONIC CREDIT LEDGER, COMMUNICATE THE SAME TO THE OFFICER EXERCISING JURISDICTION IN THE MATTER, THROUGH THE COMMON PORTAL IN FORM GST PMT-04.”

Explanatory  clause to Section 37 of the CGST Act is prescribed  as follows:

“ Explanation: For the purposes of this Chapter, the expressions “ details of outward supplies “ sall include details of invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made during any tax period”.

Section 38(1) of the CGST prescribed the manner of taking the eligible input tax credit that 

(a) The provisions of Section 38(1) of the CGST Act relates to every registered person, other than an input service Distributor or a non- resident taxable person or a person paying tax under the provisions of section10 or section 51 or Section 52.

(b) Section 38(1) clearly prescribed that the supplier’ furnished his outward details shall be communicated to the recipient electronically , for the purpose of the recipient“ TO PREPARE” his inward supply details.

(c) On receipt of Such communicated supply details, in which the recipient  person shall (i) verify, validate, (ii) modify or delete if required. And   the recipient may include therein , omission supply details if any.

(d) Section 38I1) clearly prescribed that such registered person shall act manually ,Verify, Validate, if required act to Correct [modify or delete]  on the details relating to outward supplies and credit or debit notes communicated under sub section (1) of Section 37.

(e) Section 38(2) prescribed that  after take the eligible input tax credit, that means after select and elected the eligible input tax credit to avail in the tax period, the recipient shall furnish his inward supply details electronically on the common portal after 10th  but  on or before 15th day of the month succeeding the tax period in such form and such manner as may be prescribed. Hence form GSTR-2 has been prescribed with the manner of claim the input tax credit in rule 60.

(f) The  eligible input tax credit from form GSTR-2 relating to inward supplies shall be populated in the Electronic Credit Ledger on submission of its return in form GSTR-3. ( please see, serial no.10 in  official instruction prescribed with form GSTR-2, published  in the CT Notification no. 10/2017) .

HOW TO TAKE THE ELIGIBLE INPUT TAX CREDIT

AS PER SEC.38(1) the recipient has TO ACT MANUALLY ‘SELECT’ THE ITC  RELATES TO AVAIL IN THE SAID TAX PERIOD

i. Accept,

ii. Reject, (Modify  if information   provided by supplier is incorrect), or

iii. Keep the transactions pending for action ( if goods or services have not been received).

iv. Add invoices ( not uploaded by the counter party supplier) if he is in possession of invoices and have received the goods or services.

AFTER THE RECIPIENT  SELECTED THE ITC. ON  THE DETAILS COMMUNICATED BY THE SUPPLIER,  HE HAS TO ACT MANUALLY , TO ELECT/ TAKE THE ELIGIBLE ITC  TO AVAIL   IN THE SAID TAX PERIOD, HE SHALL FURNISH HIS SUCH INWARD SUPPLY DETAILS, ELECTRONICALLY , ON THE GST COMMON PORTAL U/S.38(2) OF THE Act..

Serial number 2  in  official instruction prescribed with form GSTR-2, published  in the CT Notification no. 10/2017 is as follows: .

(iii) The recipient taxpayer has the following option to act on the auto populated information:

Accept,

Reject,

Modify (if information provided by supplier is incorrect), or

Keep the transaction pending for action (if goods or services have not been received)

(iv) After taking the action, recipient taxpayer will have to mention whether he is eligible to avail credit or not and if he is eligible to avail credit, then the amount of eligible credit against the tax mentioned in the invoice needs to be filed;

(v) The recipient taxpayer can also add invoices (not uploaded by the counterparty supplier) if he is in possession of invoices and have received the goods or services;

LET US  UNDERSTAND THE MEANING ‘ ITC AVAILED’ UNDER THE CGST ACT..

After you have  furnished the inward supply  DETAILS in the prescribed form under section 38(2). YOU HAVE TO CHECK YOURSELF WHETHER ANY WRONG  CLAIM MADE IN FURNISHED DETAILS OF INWARD SUPPLY.

THERE MAY BE CHANCES FOR :

1. DUPLICATION OF CLAIMS OF INPUT TAX CREDIT [ section 42(4) rw rule 72.]

2. Might be chances that before receipt of goods u/s 16(2)(b), wrongly claimed u/s38(2)

3. Without considered the conditions prescribed under Section 17 and 18 of the CGST Act, there may be chances for wrongly claimed.

4. There may be chances for wrong claim made under section 140.

 HONORABLE COURT DECIDED THE MEANING OF ITC AVAILED UNDER THE CGST ACT 2017.

HIGH COURT OF PATNA

M/s Commercial Steel Engineering Corporation Vs. The State of Bihar (Patna High Court); Civil Writ Jurisdiction Case No.2125 of 2019; Date : 27-06-2019

“In my opinion, the Assistant Commissioner of State Taxes has somewhere got confused to treat the transitional credit claimed by the dealer as an availment of the said credit

when in fact an availment of a credit is a positive act and unless carried out for reducing any tax liability by its reflection in the return filed for any financial year, it cannot be a case of either availment or utilization.

Example FOR INPUT TAX CREDIT AVAILED UNDER THE CGST ACT:-

For the Month of  JULY 2021.

The registered person Claimed Duplication of ITC or wrongly Claimed ITC falling under section 17(5) for an amount of Rs.1800- under IGST inclusively,  total ITC claimed is for Rs.31800-

Now the Electronic Credit Ledger  Shall Credit  Rs.31800-

For the Month of July 2021, the person’s output tax liability is 42,000-

For Set off/ deducting the output tax liability, he used only a sum of Rs.30,000- and for the remaining tax due, he paid from Electronic Cash Ledger for  Rs.12,000-

At this stage, finally, Rs.1,800- stands in Electronic Credit Ledger, which is not availment, can’t say he Wrongly Availed the ITC.

Yes, you alarted yourself, find out the wrong claims, you could rectify such discrepancies immediately before used for outstanding liability at anytime  by applying form GST PMT-04.

INPUT TAX CREDIT  WRONG AVAILED UNDER THE CGST ACT

If the recipient has  failed to reconcile the above ,failed to rectify discrepancies but he proceed to next step, means used, after the due date prescribed under sub section (2) of Section 3 of the Act. AND UNDER SUB SECTION (4) OF SECTION 49, THE ENTIRE  AMOUNT AVAILABLE, INCLUDING ITC WRONGLY CLAIM MADE and credited IN THE ELECTRONIC CREDIT LEDGER , IMMEDIATELY,but before furnish the return,   THE discrepancies AMOUNT HAS BEEN USED u/s. 49, FOR reducing the  OUTPUT TAX LIABILITY PAYABLE,  IT IS CALLED WRONG ITC AVAILED which ATTRACT OFFENCE UNDER SECTION 73 OR 74 OF THE CGST ACT as the case may be.

REMEDY TO CURE THE OFFENCE:

In such  circumstances, before your furnished return under section 39, if you applied form GST PMT-04 , for rectification of discrepancies, you need to pay interest thereon TILL SUCH PERIOD,  is called interest on ITC wrongly availed.

Sub section (5) of the Section 73 of the CGST Act prescribed that:

“ The person chargeable with tax may, before service of notice under sub section (1) or as the case may be, the statement under sub section (3), pay the amount of tax along with interest payable  thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer…”.

WITHOUT TAKEN ANY SUCH ACTION TO CURE THE OFFENCE, BUT IF YOU FILED THE RETURN UNDER SECTION 39 OF THE CGST ACT IS CALLED ITC  WRONGLY UTILISED.

REMEDY TO CURE THE WRONGLY ITC UTILISED

BY YOUR OWN EFFORTS ASCERTAINED   THE DISCREPANCIES [ sec.73(5)] OF THE ACT, THE PROVISIONS UNDER  SUB SECTION (9) OF SECTION 39 READ WITH SECTION 38(5) SHALL UPON DISCOVERY OF ANY ERROR OR OMISSION THEREIN, RECTIFY SUCH ERROR OR OMISSION IN THE TAX PERIOD DURING WHICH SUCH ERROR OR OMISSION IS NOTICED IN SUCH MANNER AS MAY BE PRESCRIBED  AND SHALL PAY THE TAX AND INTEREST, IF ANY, IN CASE THERE IS SHORT PAYMENT OF TAX ON ACCOUNT OF SUCH ERROR OR OMISSION , IN THE RETURN TO BE FURNISHED FOR SUCH TAX PERIOD.

And  OFFENCE  FALLING UNDER SECTION  73 or 74 OF THE ACT, AS THE CASE MAY BE.

IN SOME OTHER CIRCUMSTANCES IF THE DISCREPANCIES FIND OUT BY THE DEPARTMENTAL OFFICER, THE OFFENCE WILL FALL UNDER SECTION 73 OR 74 OF THE CGST ACT AS THE CASE MAY BE, DEPENDS UPON SHOW CAUSE NOTICE.

INTERPRETATION OF STATUTES – GST ACT

It has already been seen that a statute must be read as a whole and one provisions of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute.  Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between a section and other parts of the statute.  It is the duty of the courts to avoid “ a head on clash” between two sections of the same Act and whenever  it is possible to do so, to construe provisions which appear to conflict so that they harmonise.

Proviso to sub section (2) of Section 38 of the CGST Act.

“PROVIDED THAT THE COMMISSIONER MAY, FOR REASONS TO BE RECORDED IN WRITING, BY NOTIFICATION , EXTEND THE TIME LIMIT FOR FURNISHING SUCH DETAILS FOR SUCH CLASS OF  PERSONS AS MAY BE SPECIFIED THEREIN:”

NOTE: COMMISSIONER MAY EXTEND TIME LIMIT, BUT  NOT TO ALL SECTORS. AND  MUST BE FOR REASONABLE TIME .

UNDER THE ABOVE CIRCUMSTANCES, APPLYING SECTION 16(4) OF THE CGST ACT IS UNCONSTITUTIONAL.

SECTION 16(4) SHALL BE KEPT IN ABEYANCE/ SILENT MODE, SINCE JULY 2017,  TILL FUNCTIONING THE ABOVE PROVISIONS ON THE GST COMMON PORTAL, AS DISCUSSED IN THIS MEETING.

CHANCES FOR ITC WRONGLY   (CLAIMS) TAKES Or  Utilised  under the CGST Act.

PENALTY FOR CERTAIN OFFENCES :

We must study the following  Sections prescribed under the CGST Act.

Section 122 (1) (vii)

Section 122 (1) ( ix)

Section 122 (1) (iii)

Section 122 (1) (vii) Prescribed that

TAKES OR UTILIZES INPUT TAX CREDIT WITHOUT ACTUAL RECEIPT OF GOODS OR SERVICES OR BOTH EITHER FULLY OR PARTIALLY, IN CONTRAVENTION OF THE PROVISIONS OF THIS ACT OR THE RULES MADE THEREUNDER; “

NOTE:

This section descried “TAKES”. It means , an offence that, before receipt of the goods ,  the ITC  claim  has been made under section 38(2), is being  credited to the Electronic Credit Ledger under section 41(1) of the Act.

The person himself find-out such discrepancies, before the due date prescribed in section 38(2). Applied for rectification of incorrect Details, furnished in  form GST PMT-04 under sub rule (6) of rule 86 , the offence under this section can be ignored.

Section 16(2) (b) Of CGST Act Prescribed that

HE HAS RECEIVED THE GOODS OR SERVICES OR BOTH”.

Means if Wrongly Claims made under Section 16(2)(b) will attract offence u/s Section 122(vii) of the CGST Act.

Section 122 (1) ( ix) Prescribed that

“ TAKES OR DISTRIBUTE INPUT TAX CREDIT IN CONTRAVENTION OF SECTION 20, OR THE RULES MADE THEREUNDER”.

Provision in Section 20 of the CGST deals with ISD.( Input Service Distributor).

Section 122(1) (iii) Of the CGST Act.

Prescribed to the  SUPPLIER that

COLLECTS ANY AMOUNT AS TAX  BUT FAILS TO PAY THE SAME TO THE GOVERNMENT BEYOND A PERIOD OF THREE MONTHS FROM THE DATE ON WHICH SUCH PAYMENT BECOMES DUE.”

SECTION 132(1) (d) Of the CGST Act [prosecution for an offense]

Prescribed to the SUPPLIER that

COLLECTS ANY AMOUNT AS TAX BUT FAILS TO PAY THE SAME TO THE GOVERNMENT BEYOND A PERIOD OF THREE MONTHS FROM THE DATE ON WHICH SUCH PAYMENT BECOMES DUE.”

Section 16(2) (c ) Of the CGST Act.

CONDITIONS TO THE RECIPIENT TAX PAYER

Prescribed that

SUBJECT TO THE PROVISIONS OF SECTION 41, THE TAX CHARGED IN RESPECT OF SUCH SUPPLY HAS BEEN ACTUALLY PAID TO THE GOVERNMENT, EITHER IN CASH OR THROUGH UTILIZATION OF INPUT TAX CREDIT ADMISSIBLE IN RESPECT OF THE SAID SUPPLY; AND”

CO – RELATIONS BETWEEN Certain Section under the CGST Act.

SECTION 38(3)

SECTION 41(1), and

SECTION 16(2) (C) WITH

SECTION 122 (1) (iii).

ITC DISCREPANCIES CONTINUED-[SEC.38(3)]

EVEN AFTER THE RECIPIENT FURNISHED HIS VALID RETURN-

DUTY OF GST COMMON PORTAL

Sub Section(3) OF SECTION 42  OF THE CGST ACT PRESCRIBED that

Where the reduction in 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 discrepancies shall be communicated to both such persons in such manner as may be prescribed.”

Under Section 38(1) if the Recipient  furnished  details of inward supplies added,corrected or deleted; and

Under Section 38(3) of the Act, it’s the duty of the Common portal shall make communication  to the Supplier.

When THE SUPPLIER FAILED  TO TAKE ANY ACTION   ( accept/reject) UNDER SECTION 37(2) OF THE ACT,  ON WHICH, THE RECIPIENT COMMUNICATED ITC DISCREPANCIES U/S 38 (3).

  • THE RECIPIENT ELIGIBLE TO CLAIM ITC, INCLUDING ON SUCH DISCREPANCIES, PROVISIONALLY U/S 41(1) FOR THAT TAX PERIOD RETURN.
  • IN THE CASE OF SUPPLIER WHO COLLECTS TAX ON TAX INVOICE BUT FAILS TO PAY THE SAME TO THE GOVT.
  • THE SAME OUTWARD SUPPLY OR THE OUTWARD SUPPLY IS NOT DECLARED BY THE  SUPPLIER IN HIS RETURNS,
  • IT IS THE DUTY OF THE COMMON PORTAL SHALL BE COMMUNICATED TO THE RECIPIENT IN FORM GST MIS-1 AND TO THE SUPPLIER IN FORM GST MIS-2, ON OR BEFORE THE LAST DATE OF THE MONTH IN WHICH MATCHING HAS BEEN CARRIED OUT,PRESCRIBED IN SECTION 42(3)OF THE ACT, READ WITH SUB RULE(1) OF RULE 71.

AFTER SUCH PORTAL COMMUNICATIONS, EITHER THE SUPPLIER OR RECIPIENT HAS NOT RECTIFIED SUCH DISCREPANCIES UNDER SUB RULE (2) OR (3) OF RULE 71?

UNDER SECTION 42(5) READ WITH RULE 71(4),

SUCH TAX DISCREPANCY  AMOUNT SHALL BE ADDED TO THE OUTPUT LIABILITY OF THE RECIPIENT IN HIS RETURN TO BE FURNISHED IN FORM GSTR-3 FOR THE MONTH SUCCEEDING THE MONTH IN WHICH THE DISCREPANCY IS MADE AVAILABLE. He has to pay interest also.

IN THE CASE OF DISCREPANCIES on ‘ADD’, HERE SECTION 16(2)(C )OF THE ACT HAS BEEN APPLIED.

The supplier may VOLUNTARILY rectify such incorrect or omission details under the provisions of section 37(3) read with section 39(9). OR by proper officer.

DUTY OF THE COMMON  PORTAL / proper officer.

[to safeguard Genuine Tax payers Money, by way of, tax CHARGED BY the supplier]

Common portal / proper officer HAS TO APPLY SECTION 122 (1)(iii) OR SEC.132(1) (d) OF THE ACT for recovery of tax with interest and penalty/fine thereon. And ITC mis matching , Under Section 16(2)(c),the entire amount collected from the recipient, read with    section 42(5) & (8) shall be reversed to the Recipient under section 42(7)of the Act.

FINAL ACCEPTANCE OF INPUT TAX CREDIT CLAIM AND COMMUNICATION THEREOF, PROVISIONS PRESCRIBED IN SECTION 42(2) OF THE ACT, IN FORM GST MIS-1, COMMUNICATED ELECTRONICALLY ON THE COMMON PORTAL UNDER RULE 70 OF THE CGST RULES 2017.

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