The Central Board of Indirect Taxes and Customs (CBIC) has recently issued a GST circular no 183/2022 clarifying the procedure to be followed for dealing with the difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19.
The circular GST Circular 183/2022 also outlines several steps that must be taken by assesses or their representatives to ensure that their claims are based on accurate information. It is important for taxpayers to understand these guidelines so they can make sure they meet the requirements of the CBIC and are able to avail of all the available tax credits.
Note: This circular is applicable on only FY 2017-18 and 2018-19 only.
Input Tax Credit is available when it gets reflected in GSTR-2A/ GSTR 2B of the recipient. In this Article we are going to discuss when a taxpayer can avail the Input Tax Credit (ITC) when it is not reflecting in his GSTR-2A/2B and what the procedure to avail the same is for the FY 2017-18 and 2018-19.
During the initial period of implementation of GST, during the financial years 2017-18 and 2018-19, in many cases, the suppliers have failed to furnish the correct details of outward supplies in their FORM GSTR-1, which has led to certain deficiencies or discrepancies in FORM GSTR-2A of their recipients. However, the concerned recipients may have availed input tax credit on the said supplies in their returns in FORM GSTR-3B.
Section 16 of the Central Goods and Services Tax Act, 2017 (CGST Act) provides for eligibility and conditions for availing Input Tax Credit.
The discrepancies between the amount of ITC availed by the registered persons in their returns in FORM GSTR3B and the amount as available in their FORM GSTR-2A are being noticed by the tax officers during proceedings such as scrutiny/ audit/ investigation etc. due to such credit not flowing to FORM GSTR-2A of the said registered persons.
Such discrepancies are considered by the tax officers as representing ineligible ITC availed by the registered persons, and are being flagged seeking explanation from the registered persons for such discrepancies and/or for reversal of such ineligible ITC.
However, it is mentioned that FORM GSTR-2A could not be made available to the taxpayers on the common portal during the initial stages of implementation of GST. Further, restrictions regarding availment of ITC by the registered persons up to certain specified limit beyond the ITC available as per FORM GSTR-2A were provided under rule 36(4) of CGST Rules, 2017 only with effect from 9th October 2019. However, the availability of ITC was subjected to restrictions and conditions specified in Section 16 of CGST Act from 1st July, 2017 itself.
In view of this, various representations have been received from the trade as well as the tax authorities, seeking clarification regarding the manner of dealing with such discrepancies between the amount of ITC availed by the registered persons in their FORM GSTR-3B and the amount as available in their FORM GSTR-2A during FY 2017-18 and FY 2018-19.
In order to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act, hereby clarifies, there can be below 4 possible scenarios for Mismatch of ITC claimed in GSTR 3B & GSTR-2A:
1. Failed to file GSTR-1: Where the supplier has failed to file FORM GSTR-1 for a tax period but has filed the return in FORM GSTR-3B for said tax period, due to which the supplies made in the said tax period do not get reflected in FORM GSTR-2A of the recipients.
2. Failed to report particular supply in GSTR 1: Where the supplier has filed FORM GSTR-1 as well as return in FORM GSTR-3B for a tax period, but has failed to report a particular supply in FORM GSTR-1, due to which the said supply does not get reflected in FORM GSTR-2A of the recipient.
3. B2B supply wrongly reported as B2C supply: Where supplies were made to a registered person and invoice is issued as per Rule 46 of CGST Rules containing GSTIN of the recipient, but supplier has wrongly reported the said supply as B2C supply, instead of B2B supply, in his FORM GSTR-1, due to which the said supply does not get reflected in FORM GSTR-2A of the said registered person
4. Wrong GSTIN Reported: Where the supplier has filed FORM GSTR-1 as well as return in FORM GSTR-3B for a tax period, but he has declared the supply with wrong GSTIN of the recipient in FORM GSTR-1.
In such cases, the difference in ITC claimed by the registered person in his return in FORM GSTR-3B and that is available in FORM GSTR-2A may be handled by following procedure below:
- The proper officer shall first seek the details from the registered person regarding all the invoices on which ITC has been availed by the registered person in his FORM GSTR 3B but which are not reflecting in his FORM GSTR 2A.
- He shall then ascertain fulfilment of the following conditions of Section 16 of CGST Act in respect of the input tax credit availed on such invoices by the said registered person:
- That he is in possession of a tax invoice or debit note issued by the supplier or such other tax paying documents;
- That he has received the goods or services or both;
- That he has made payment for the amount towards the value of supply, along with tax payable thereon, to the supplier.
- Besides, the proper officer shall also check whether any reversal of input tax credit is required to be made in accordance with section 17 or section 18 of CGST Act and also whether the said input tax credit has been availed within the time period specified under sub-section (4) of section 16 of CGST Act.
- To avail the Input Tax Credit condition of clause (c) of sub-section (2) of Section 16 of CGST Act needs to be fulfilled i.e. The tax charged in respect to the supply has been actually paid to the Government. As the ITC is not reflecting in 2A so the proper office may take following action depending on mismatch amount:
- Difference between the ITC during the Financial Year Exceeds 5 Lacs: In case, where difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a supplier for the said financial year exceeds Rs 5 lakh, the proper officer shall ask the registered person to produce a certificate for the concerned supplier from the Chartered Accountant (CA) or the Cost Accountant (CMA), certifying that supplies in respect of the said invoices of supplier have actually been made by the supplier to the said registered person and the tax on such supplies has been paid by the said supplier in his return in FORM GSTR 3B. Certificate issued by CA or CMA shall contain UDIN.
- Difference between the ITC during the Financial Year up to Rs 5 Lacs : In cases, where difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a supplier for the said financial year is upto Rs 5 lakh, the proper officer shall ask the claimant to produce a certificate from the concerned supplier to the effect that said supplies have actually been made by him to the said registered person and the tax on said supplies has been paid by the said supplier in his return in FORM GSTR 3B.
Important points to remember:
- However, it may be noted that for the period FY 2017-18, as per proviso to section 16(4) of CGST Act, the aforesaid relaxations shall not be applicable to the claim of ITC made in the FORM GSTR-3B return filed after the due date of furnishing return for the month of September, 2018 till the due date of furnishing return for March, 2019, if supplier had not furnished details of the said supply in his FORM GSTR-1 till the due date of furnishing FORM GSTR 1 for the month of March, 2019.
- It may also be noted that the clarifications given hereunder are case specific and are applicable to the Bonafide errors committed in reporting during FY 2017-18 and 2018- 19.
- Further, these guidelines are clarificatory in nature and may be applied as per the actual facts and circumstances of each case and shall not be used in the interpretation of the provisions of law.
- These instructions will apply only to the ongoing proceedings in scrutiny/ GST audit / Investigation, etc. for FY 2017-18 and 2018-19 and not to the completed proceedings. However, these instructions will apply in those cases for FY 2017-18 and 2018-19 where any adjudication or GST appeal proceedings are still pending.
Best software to reconcile GST data faster and ensure 100% compliance – IRIS GST Software
As a registered taxpayer, reconciling your purchase invoices with the supplier-uploaded invoices on the GST system is a critical activity as it determines your ITC claim. Further, the Government issues legal notices to taxpayers for discrepancies in the ITC claimed in GSTR 3B and the amount as per supplier uploaded details. Our Smart Reconciliation comes in handy for managing reconciliation tasks in a timely, efficient and easy manner.
1. Bulk Data upload facility – It will help you to upload data for multiple GSTINs in one go
2. 2P Summary – Provides a summary of uploaded data. You can quickly check your uploaded data with the count of invoices getting considered for reconciliation
3. Bulk download of GSTR 2A – For multiple periods, you can send ’Get GSTR 2A data’ request in one go
4. Smart reconciliation – It auto-runs on your data and provides you the reconciliation results with summary
5. Monthly reconciliation results with monthly GSTR 2A report – Helps you to decide monthly ITC and how much you can claim as provisional ITC
6. Net vendor summary – It gives you a glance reconciliation status for each vendor
7. PAN level reports and GSTIN level reports – It will help you to analyse in detail of your purchaser-only and supplier-only invoices Send Mail – By using this feature you can easily communicate discrepancies to your vendor
8. Advanced reconciliation – It helps you to extend the scope of comparison between data that is in the supplier-only and purchaser-only category. Some rules that help in better reconciliation are:
- Checking invoices across the financial years
- Fuzzy invoice no. logic
- Checking exact values ignoring invoice number
- Checking invoices within the tolerance provided by you
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