Trade & Industry was in the panic situation and confusion on various interpretation of law of availing the ITC on or before due date of filing GST Return for the month of Sept 2018. Majority of the consultants have advised their clients to avail the credit before filing the Sept Return, so as to avoid any interpretative issue & litigation from department side. It is always better to avail credit as early as possible and use the liquidity rather than puzzled with interpretation and litigation from department side.
Intention of the government to permit availing of ITC pertaining to July 2017 to March 2018 upto filing of Return for the month of Sept 2018 is very clear from the following actions of the CBIC:
- The Annual Return Form GSTR9 in clause 8C requires ITC on inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 but availed during April to September, 2018. This may be interpreted by the department that ITC pertaining to 17-18 has to be availed till Sept 2018, else it will lapse. Necessary clarification / amendment in Clause 8C of Annual Return to be brought in.
- CBIC issued the circular no. 72/2018 Central Tax dtd. 26.10.2018 wherein it has been clearly mentioned that If the time limit specified in sub-section (2) of section 34 of the CGST Act has lapsed, a credit note may still be issued by the supplier for such return of goods but the tax liability cannot be adjusted by him in his hands. It may further be noted that in case time expired goods are returned beyond the time period specified in the sub-section (2) of section 34 of the CGST Act and a credit note is issued consequently, there is no requirement to declare such credit note on the common portal by the supplier (i.e. by the person who has issued the credit note) as tax liability cannot be adjusted in this case. Quote:
However, it is important to examine the provisions of Section 16 (4) of CGST Act 2017.
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Let us understand the returns which is required to be furnished under Section 39, which is for furnishing the returns :
|39(1)||(1) 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 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, 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 as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof.||It was expected earlier that GSTR-1 for outward supply will be filed on 10th of subsequent month and GSTR-2A will be auto generated which needs to be confirmed / modified / rejected. Thereafter there will be auto-population GSTR-2 and allowed additional entries to be made for which supplier might have not filed GSTR-1.
Thereafter, GSTR-1A will be generated and mismatch to be removed. Thereafter GSTR-3 will be auto populated and to be confirmed and payment of taxes to be made through electronic credit ledger / electronic cash ledger.
In other words, Section 39 provided the return in the form GSTR-3 but there was a breakdown in the system and taxpayers were suffering and therefore simplified GSTR-3B return was notified under Rule 61(5) & (6) which was inserted vide notification 17/2017 – CT dt 27.07.2017
5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38 has been extended and the circumstances so warrant, the Commissioner may, by notification, [specify the manner and conditions subject to which the]41 return shall be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.
(6) Where a return in FORM GSTR-3B has been furnished, after the due date for furnishing of details in FORM GSTR-2—
(a) Part A of the return in FORM GSTR-3 shall be electronically generated on the basis of information furnished through FORM GSTR-1, FORM GSTR-2 and based on other liabilities of preceding tax periods and PART B of the said return shall be electronically generated on the basis of the return in FORM GSTR-3B furnished in respect of the tax period;
(b) the registered person shall modify Part B of the return in FORM GSTR-3 based on the discrepancies, if any, between the return in FORM GSTR-3B and the return in FORM GSTR-3 and discharge his tax and other liabilities, if any; (c) where the amount of input tax credit in FORM GSTR-3 exceeds the amount of input tax credit in terms of FORM GSTR-3B, the additional amount shall be credited to the electronic credit ledger of the registered person.
The Press Release was issued on 18th October 2018 clarifying the position that the furnishing of outward details in FORM GSTR-1 by the corresponding supplier(s) and the facility to view the same in FORM GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions of section 16 of the Act. The apprehension that ITC can be availed only on the basis of reconciliation between FORM GSTR-2A and FORM GSTR-3B conducted before the due date for filing of return in FORM GSTR-3B for the month of September, 2018 is unfounded as the same exercise can be done thereafter also.
Further Notification No. 55/2018 Central Tax dtd. 21.10.2018 was issued for extending the time period of filing GSTR-3B till 25th Oct 2018.
In view of the above trade & industries have the following questions in their mind.
- Whether ITC can be availed when supplier have not filed / uploaded GSTR-1 and such transactions do not reflect in GSTR-2A?
- Whether ITC can be availed when supplier has uploaded GSTR-1 and transaction is reflected in GSTR-2A but corresponding credit is not availed / reflected in GSTR-3B of the tax payer or ITC receivable in the books of accounts?
- Whether ITC can be availed when mismatches in quantity and /or value do not match with GSTR-1 uploaded by Supplier and reflected in GSTR-2A?
- Whether ITC can be availed when supplier has not filed GSTR-3B?
- Whether ITC not availed against the receipts of supply and goods & services supplied on or before 31st March 2018 can be taken even before filing annual return?
Attempt has been made to clarify the legal provisions to address all the questions as raised above.
Let us appreciate the provisions of ITC according to Section 16(2) of CGST Act 2017:
Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless:
- he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
- he has received the goods or services or both. Explanation: For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;
- 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
- he has furnished the return under section 39:
Therefore, taxpayer will be entitled to avail ITC on goods & services other than specified in Section 17 of CGST Act 2017, provided he has received the goods and services prior to 31st March 2018 and tax invoice is in his possession. Further, it is mandatory to ensure the supplier has paid the tax which can be verified from GSTN network, where it can be checked whether supplier has filed GSTR-3B return or not. If supplier has not filed GSTR-3B return, it means he has not paid the tax and therefore clause no. (c) is not satisfied and hence ITC availed by him will not be allowed or litigated.
Even if, supplier has not uploaded GSTR-1 or transaction is not reflected in GSTR-2A but filed GSTR-3B, in my opinion ITC will be allowed, since GSTR-1 is notified in Section 37 of CGST Act 2017. Therefore, it will not restrict availment of ITC.
GSTR-3 is required to be filed under Section 39 which has not been notified to be implemented and therefore fulfilment of condition no 3 does not arise and hence if goods & services are received by the tax payer against tax invoice which is in his possession, he can avail and check whether supplier have filed GSTR-3B or otherwise.
In view of the above discussions, I have clarified the questions in the minds of trade & industries:
1. Whether ITC can be availed when supplier have not filed / uploaded GSTR-1 and such transactions do not reflect in GSTR-2A?
Answer : Yes
2. Whether ITC can be availed when supplier has uploaded GSTR-1 and transaction is reflected in GSTR-2A but corresponding credit is not availed / reflected in GSTR-3B of the tax payer or ITC receivable in the books of accounts?
Answer : taxpayer has to ensure the transactions reflected in GSTR-2A pertains to the receipts and confirm the receipts and tax invoice in his hand and account the same in the books of accounts and avail the ITC till the date of filing annual return.
3.Whether ITC can be availed when mismatches in quantity and /or value do not match with GSTR-1 uploaded by Supplier and reflected in GSTR-2A?
Answer : Since, matching provision in accordance with Section 41 & 42 has not been implemented, there is no question of removal of mismatches and hence ITC can be availed even when mismatches exist, subject to receipt of the goods and tax invoice is in possession of tax payer.
4. Whether ITC can be availed when supplier has not filed GSTR-3B
Answer: In our opinion, condition number 3 of Section 16 (2) may not be satisfied and hence such ITC may be disputed. However, even though it is litigated, decision of the higher authorities will be in the favor of taxpayer.
5. Whether ITC not availed against the receipts of supply and goods & services supplied on or before 31st March 2018 can be taken even before filing annual return?
Answer: In this regard, the Annual Return Form GSTR9 in clause 8C requires ITC on inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 but availed during April to September, 2018. This may be interpreted by the department that ITC pertaining to 17-18 has to be availed till Sept 2018, else it will lapse. Necessary clarification / amendment in Clause 8C of Annual Return to be brought in. However, based on interpretation of Section 16(4) of CGST Act 2017 by which it signifies that time limit contemplated in Section 16(4) is an unknown date or the due date for filing the annual return, whichever is earlier. As on date, the due date for filing annual return is 31.12.2018 and hence a possible interpretation could be that ITC can be availed upto the due date for filing the annual return and the due date for filing GSTR-3B for the month of September 2018 may not be the cut-off point. However, this may be litigated but the credit will not lapse since decision of the higher authorities will be in the favour of the tax payer.