Legal Base of the Provision

1.0 As per the Section 2 and sub-section (117) of the CGST Act, 2017, ‘valid return’ means a return furnished under sub-section(1) of section 39 on which self-assessed tax has been paid in full;

1.1 As per legal definition of ‘valid’ means binding; possessing legal force or strength; legally sufficient. Legally sufficient means that the document has been reviewed by an attorney or component legal office, and determined to be in compliance with applicable statutes, regulations, policies, and procedures.

1.2 As per the sub-section(97) of section 2 of the CGST Act, 2017, “return” means any return prescribed or otherwise required to be furnished by or under this Act or the rules made there under;

1.3 As per the section 42(1)(a) of the CGST Act, 2017, the details of every inward supply furnished by a registered person(recipient) for a tax period shall be matched with corresponding details of outward supply furnished by the corresponding registered person(supplier) in his valid return for the same tax period or any preceding tax period;

1.4 As per sub-section (1) of section 39 of the CGST Act, every registered person, other than an input service distributor or a non-resident taxable person or a person paying tax under the provisions of section 10(composition levy) or section 51(Tax deduction at source) or section 52(collection of tax at source) shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed. 

Analysis of the provision

2.0 As per CBIC mentioned in its article, “valid return” means the details of every inward supply furnished by the taxable person(i.e. the “recipient” of goods and/or services) in form GSTR-2 shall be matched with corresponding details of outward supply furnished by the corresponding taxable person(i.e. the “supplier” of goods and/or services) in his valid return.

2.1 A return may be considered to be a valid return only when the appropriate GST has been paid in full by the taxable person as shown in such return for a given tax period.

2.2 In terms of the provisions of the Model GST law, which was provided by Empower Committee (EC) of State Finance Ministers for the purpose of allowing ITC, a return may be considered to be a valid return only when the appropriate GST has been paid in full by the taxable person as shown in such return for a given tax period.

2.3 The basic features of the return mechanism in GST includes electronic filling of returns, uploading of invoice level information, auto-population of information relating to input tax credit from returns of supplier to that of recipient, invoice level information matching and auto-reversal of input tax credit in case of mismatch. The return mechanism is designed to assist the taxpayer to file returns and avail ITC.

2.4 It is important to note that a taxpayer is not required to file all the type of returns. In fact, taxpayers are required to file returns depending on the activities they undertake as per turnover exceeding or less than the threshold limit on monthly basis or quarterly basis respectively.

Query raised and its answer

Query

3.0 Whether mere filing of GSTR-1 (by 10th of the following month) without filling the relevant GSTR-3B (by 20th of the following month) for such tax period by the supplier can be considered as valid return?

Answer

The recipient shall ascertain the net GST liability after considering his output tax liability on outward supplies made and eligible input tax credit available on inward supplies. Such net GST liability would have to be discharged by the recipient either using electronic cash/credit ledger (taking into consideration the rules for utilization of ITC). Consequent to which, the recipient would be filling his GSTR-3B return, then it is called as valid return.

Query

3.1 If the taxable person has not furnished a valid return for the previous tax period, then can be allowed to furnish the current return period?

Answer

It may be noted that in terms the provisions of Model GST law, in case the taxable person has not furnished a valid return for the previous tax period, he shall not be allowed to furnish the return for the current period.

Query

3.2 If the taxable person, who has not furnished a valid return, then can be allowed to utilize the input tax credit till he discharges the self-assessed tax liability?

Answer

If a taxable person who has not furnished a valid return shall not be allowed to utilize the input tax credit till he discharges the self-assessed tax liability. Thus, in effect, the utilization of ITC for any given tax period is always subject to furnishing of a “valid return” for previous tax period by such taxable person.

Query

3.3 The question which arises here is whether the ITC as accepted above can be considered as eligible credit for all practical purposes?

Answer

Subject to the provision of section 16 of the CGST Act, 2017 and read with rule 36 of the CGST rule, 2017, input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the supplier under sub-section (1) of section 37, shall not exceed 10 percent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the supplier under sub-section(1) of section 37.

Conclusion

Based on the above cited reason and analysing the provisions I conclude that a return may be considered to be a valid return only when the appropriate GST has been paid in full by the taxable person as shown in such return for a given tax period. The details of every inward supply furnish by a registered person (recipient) for a tax period shall be matched with corresponding details of outward supply furnished by the corresponding registered person (supplier) in his valid return for the same tax period or any preceding tax period.

Disclaimer:  “This article is for the purpose of information and shall not be treated as a solicitation in any manner and for any other purpose whatsoever. It shall not be used as a legal opinion and not be used for rendering any professional advice. This article is written on the basis of the author’s personal experience and provision applicable as on the date of written of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however, if it still persists kindly intimate us to avoid such error for the benefit of other readers”.

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Qualification: Student - CA/CS/CMA
Company: KPHB&ASSOCIATES (Chartered Accountants)
Location: Bhubaneswar, Odisha, IN
Member Since: 30 Jul 2019 | Total Posts: 3
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2 Comments

    1. Santosh Behera says:

      Sir,
      Though particularly not mentioned in law regarding the “valid return”, so I consider the above cited provisions as a legal base then analyse and conclude with above reason with my article. Hope you understand and consider my point. Thank you for your comment and professionalism.

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