GSTR 3B witnessed a bunch of updates in July 2022 after the two day long 47th GST Council Meeting. The CBIC has announced a bundle of clarifications and updates through the latest GST Council Meeting recommendations, GST Notifications and Circulars. And one of the most conversed topic is the updates in GSTR 3B. It’s a return through which GSTN collects tax from registered taxpayers, the said update will impact majority of taxpayers.
Let us discuss the summary of updates in GSTR 3B announced by the CBIC in detail below:
A) ITC Computation
(i) Circular 170/02/2022 provides update in manner of ITC Computation to be reported in GSTR 3B.
GSTR 3B Table 4 – Eligible ITC
|A||ITC available whether in full or part||ITC available whether in full or part|
|1)||Import of Goods||Import of Goods||No change|
|2)||Import of Service||Import of Service||No change|
|3)||Inward supplies liable to reverse charge (other than 1 or 2 above)||Inward supplies liable to reverse charge (other than 1 or 2 above)||No change|
|4)||Inward supplies from ISD||Inward supplies from ISD||No change|
|5)||All other ITC||All other ITC||ITC which is reversed in earlier tax period through 4B(2) and reclaimed now in 4D(1) needs to be reported here as well|
|B||ITC Reversed||ITC Reversed|
|1)||As per Rule 42 & 43 of CGST rules||As per Rule 38, 42 & 43 of CGST rules & section 17(5)||Report reversal of ITC which is permanent in nature and non-reclaimable (Refer note 1)|
Report reversal of ITC which is not permanent in nature and can be claimed in future (Refer note 2)
Also ITC mistakenly taken in the previous period can be rectified here.
|C||Net ITC available (A-B)||Net ITC available (A-B)||Credited in electronic credit ledger|
|D||Ineligible ITC||Other Details|
|1)||As per Section 17(5)||ITC reclaimed which was revered in 4B (2) in earlier tax period||ITC reversed in 4B(2) and later reclaimed at a future date need to be reported here as well as in table 4A(5)|
|2)||Others||ITC ineligible under section 16(4) and ITC restricted due to Place of supply||ITC ineligible as per GSTR 2B (Refer note 3)|
1) Table 4B(1) is used for reversals which are permanent in nature and cannot be reclaimed. Cases of such reversal are
- Rule 38 – Reversal of ITC by a banking company or a financial institution
- Rule 42 – Reversal of ITC on account of supply of exempted goods or services
- Rule 43 – Reversal of ITC on capital goods on account of supply of exempted goods or services
- And ineligible ITC under section 17(5) (block credit)
2) Table 4B(2) is used for reversals which are not permanent in nature and can be reclaimed at a later date. Cases of such reversal are:
- Rule 37 – Reversal of ITC in the case of non-payment of consideration to supplier within 180 days
- Section 16(2)(b) – Non-receipt of goods or services in relevant tax period
- Section 16(2)(c) – Tax has not been paid by the supplier
3) Table 4D(2) will be used to show ITC which is marked ineligible in GSTR 2B. Cases of reversal are:
- The state of the supplier and POS is the same, whereas the recipient is located in another state.
- When the purchaser is not eligible for ITC towards an invoice or debit note is issued for the supply of goods or services, or both.
(ii) Circular 172/04/2022 clarifies interpretation of Sec 17(5)(b) of CGST Act
Please note below extracts of Section 17(5)(b)
Section 17(5)(b) the following supply of goods or services or both
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide to its employees under any law for the time being in force.4
Clarification issued by GST Circular 172/04/2022
a) Proviso after clause (iii)of section 17(5)(b) applicable to entire section 17(5)(b) of CGST Act. i.e if it is obligatory for employer under any law to provide any goods or services mentioned u/s 17(5)(b) say food & beverage, heath services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, membership of club, health and fitness centre, insurance & health insurance ,travel benefit etc to the employees , then ITC is available to the employer on said goods and services.
b) “leasing” referred to in Section 17(5)(b)(i) refers to leasing of motor vehicles, vessels and aircrafts only and not to leasing of any other items.
Accordingly, availment of ITC is not barred u/s 17(5)(b)(i) of the CGST Act in case of leasing, other than leasing of motor vehicles, vessels and aircraft
B) Introduction of table 3.1.1 to report supplies made through e-commerce operators (ECO)
45th GST Council meeting held on 17th September, 2021 followed by notification 17/2021 classifies “Restaurant Service” u/s 9(5) of the CGST Act, 2017 wherein the tax on such supplies would be paid by the E-commerce operator if such supplies made through it.
To comply with the said notification, a new table 3.1.1 is updated in GSTR-3B
In the new table 3.1.1 taxpayers will be required to provide details about supplies made through ECO, where such ECO pays tax on reverse charge basis.
C) Correct reporting in Table 3.2 – inter-state supplies made to unregistered persons, composition taxable persons and UIN holders
Information sought in Table 3.2 of GSTR-3B w.r.t inter-state supplies made to unregistered persons, composition taxable persons and UIN holders is required to be furnished, place of supply-wise, even though the details of said supplies are already part of the supplies declared in Table 3.1 of GSTR 1. Currently the said information is not being correctly reported
For assisting the registered persons, Table 3.2 of GSTR-3B is being auto-populated on the portal based on the details furnished by them in their GSTR-1.
It is advised that RP shall update their customer database properly with correct State name and ensure that correct PoS is declared in the tax invoice and in
Table 3.2 of GSTR-3B while filing their return, so that tax reaches the Consumption State as per the principles of destination-based taxation system.
It is further advised that
|Registered persons making inter-State supplies||To||Shall report in GSTR 3B Place of supply wise||GSTR 1|
|Unregistered person||Table 3.2||Table 7B or 5 or 9 or 10|
|Composition||Table 3.2||Table 4A or 4C or 9|
|UIN||Table 3.2||Table 4A or 4C or 9|
Any amendment carried out in Table 9 or 10 of GSTR-1 or any entry in Table 11 of GSTR-1 relating to such supplies should also be given effect while reporting the figures in Table 3.2 of GSTR-3B.
D) Payment and Settlement of Taxes
i) Electronic Credit Ledger
Balance of electronic credit ledger can only be used for making payment of output tax whether self-assessed or payable as a consequence of any proceeding instituted under the provisions of GST Laws. And not for payment of any interest, penalty, late fee, erroneous refund, RCM Liability.
ii) Electronic Cash Ledger
Balance of Electronic cash ledger can be used for making any payment towards tax, interest, penalty, fees, erroneous refund, RCM liability or any other amount payable under the provisions of the GST Laws
Transfer of balance from cash ledger – The balance from an electronic cash ledger can be transferred towards IGST or CGST between the registrations obtained on the basis of the same PAN, provided there are no unpaid liabilities.
iii) UPI and IMPS are allowed as additional modes of payment for tax, interest, penalty, fees, or any other amount.
E) Other important updates
i) Revocation of suspension: Suspension status due to non-filing of returns for the specified period by regular taxpayers and 3 months by the composition dealer shall be revoked on the filing of all previous returns if the registration has not been already canceled.
ii) Council meeting recommended that proposal for comprehensive changes in GSTR-3B be placed in public domain for seeking inputs/suggestions of the stakeholders. – Yet to be done
These were the details of all the new updates in GSTR 3B for July 2022. The 47th GST Council Meeting announcements, GST Notifications and Circulars have upgraded the way we compute and report ITC, report outward supplies to other than regular taxpayers and pay our taxes. Allowing transfer of electronic cash ledger balance and payment of taxes through additional modes of UPI and IMPS is a welcome move by Government that brings in ease of compliance and encourages digitalization. Hope this article gives you an overview of all the changes and updates in GSTR 3B and you can understand its impact on your GST compliance and ITC claim aptly.
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General Manager Accounts & Finance, Parekh Group