Clarification regarding the disparity between the Input Tax Credit (ITC) claimed in Form GSTR-3B and the information provided in Form GSTR-2A for FY 2017–18 and FY2018–19
Introduction
The Central Goods and Services Tax Act of 2017 (hereafter referred to as the "CGST Act"), Section 16, specifies the prerequisites and guidelines for claiming Input Tax Credit (ITC). In several instances during the initial phase of GST implementation, which covered the financial years 2017–18 and 2018–19, suppliers failed to provide the right information about outward supplies in their FORM GSTR–1, which resulted in errors in their recipients' FORM GSTR–2A. However, it's possible that the concerned beneficiaries claimed an input tax credit on the aforementioned shipments in their GSTR-3B filings.
It is stated that during the early stages of GST implementation, FORM GSTR-2A could not be made available to taxpayers on the common portal. Furthermore, restrictions on availment of ITC by registered persons beyond the ITC available as per FORM GSTR-2A were imposed under rule 36(4) of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as "CGST Rules") only with effect from October 9, 2019. However, the availability of ITC was restricted and subject to conditions specified in Section 16 of the CGST Act as of July 1, 2017.
Scenario for difference in 3B and 2A
When a supplier fails to file FORM GSTR-1 for a tax period but files a return in FORM GSTR-3B for that tax period, the supplies made during that tax period are not reflected in the recipients' FORM GSTR-2A.
Where the supplier has filed FORM GSTR-1 as well as a return in FORM GSTR-3B for a tax period, but has failed to report a specific supply in FORM GSTR-1, the said supply is not reflected in the recipient's FORM GSTR-2A
When supplies are made to a registered person and an invoice is issued in accordance with Rule 46 of the CGST Rules containing the recipient's GSTIN, but the supplier incorrectly reports the supply as a B2C supply rather than a B2B supply in his FORM GSTR-1, the supply is not reflected in the registered person's FORM GSTR-2A.
Where the supplier has filed FORM GSTR-1 as well as a return in FORM GSTR-3B for a tax period, but has declared the supply in FORM GSTR-1 with the incorrect GSTIN of the recipient.
Clarification
The proper officer shall first obtain information from the registered person regarding all invoices for which ITC has been claimed in his FORM GSTR 3B but is not reflected in his FORM GSTR 2A. He must then ensure that the following conditions of Section 16 of the CGST Act are met in relation to the input tax credit claimed on such invoices by the said registered person:
That he has a tax invoice or debit note issued by the supplier, or other tax-paying documents.
That he has received either the goods or the services, or both;
That he has made payment to the supplier for the amount towards the value of supply, as well as any applicable tax.
The proper officer must also determine if any input tax credit reversals are required to be made in line with Sections 17 or 18 of the CGST Act, as well as whether the aforementioned input tax credit was used within the time frame prescribed in Section 16's Subsection (4).
The proper officer may take the following action to verify the condition of clause (c) of sub-section (2) of Section 16 of the CGST Act that tax on the said supply has been paid by the supplier.
In the event that the 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 request that the registered person produce a certificate from a Chartered Accountant (CA) or a Cost Accountant (CMA) certifying that supplies in respect of the said invoices of supplier have actually been made by the supplier.
In cases where the 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 fiscal year is up to Rs 5 lakh, the proper officer shall request the claimant to produce a certificate from the concerned supplier stating that said supplies were actually made by him to the said registered person and the tax on said supplies was paid by the said supplier in his return in FORM GSTR-3B.
It should be noted that the aforementioned relaxations will not be applicable for 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, until the due date of furnishing return for March, 2019, if the supplier had not provided details of the said supply in his FORM GSTR-1 until the due date of furnishing FORM GSTR1 for the month of FY 2017–18, as per proviso to section 16(4) of CGST Act.
We hope the above blog was helpful in enhancing your knowledge on the matter. In case of any queries feel free to get in touch with our team of experts.
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