GSTR – 3B is ‘not a return’ under GST law | Applicability of GSTR 3B

GSTR-3B is not valid return
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Gujarat High Court rules that part of Press Release on last date for availing ITC for FY 2017-18 is illegal

At the beginning of the GST-era, Form GSTR – 3B was introduced to taxpayers for ease of convenience in the initial phases and the filling of Forms GSTR – 2 and GSTR – 3 were deferred indefinitely.  Further, the GST law provides for the last date for availing ITC pertaining to previous financial year i.e., due date for filing return of September of the following financial year. The Central Government had issued a Press Release dated 18 October 2018 clarifying the due date for claiming ITC for FY 2017-18 as 25 October 2018.

In this context, the legal provisions concerning the introduction of Form GSTR – 3B and the last date for availing ITC for the period FY 2017-18 were challenged before the Hon’ble Gujarat High Court (‘HC’) in the case of AAP and Co., Chartered Accountants (R/ Spl Civil Appl No. 18962 of 2018).

The HC vide order dated 24 June 2019 held that the Form GSTR – 3B was not a return under the GST law for the purpose of Section 16 read with Section 39 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’).  Consequently, the HC held that the Press Release to the extent it clarifies the due date for availing ITC for FY 2017-18 in para 3 was partly illegal.

1. Facts of the case

  1. Section 16(4) – Eligibility to avail Input Tax Credit (‘ITC’): As per the provisions of Section 16(4) of the CGST Act, a Registered Taxpayer shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods/ services/ both after the earlier of the following dates:
    • Due date of furnishing of the return under Section 39 for the month of September following the end of the financial year
    • Furnishing of the relevant Annual Return
  2. Press Release by Government of India: As per para 3 of the Press Release by the Government of India on 18 October 2018, the last date for availing ITC in relation to the invoices issued by the supplier(s) during the period from July 2017 to March 2018 is the last date for the filing of such return for the month of September 2018 i.e., 20 October 2018, as taxpayers have been self-assessing and availing ITC through FORM GSTR – 3B.
  3. The Press Release was challenged before the Gujarat High Court on the ground that Para 3 of the Press Release was not valid as Form GSTR – 3B is not a ‘return’ for the purpose of availing ITC under the CGST Act.

2. Arguments of the taxpayer

  1. Section 39 – Furnishing of Returns: As per the provisions of Section 39(1) of the CGST Act, every Registered Taxpayer shall furnish a monthly return in such form and manner as may be prescribed. The form and manner of monthly return has been prescribed in the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’)
  2. Rule 61 – Form and Manner of Submission of Monthly Return:
    • As per the provisions of Rule 61(1) of the CGST Rules, a Registered Taxpayer shall be required to furnish a return specified under Section 39(1) of the CGST Act in Form GSTR-3.
    • Further, as per the provisions of Rule 61(5) of the CGST Rules, in case the time limit for furnishing of the details in Forms GSTR – 1 and GSTR – 2 has been extended and the circumstances so warrant, the GST authorities may specify the manner and conditions under which the Return in Form GSTR – 3B shall be furnished.
    • The Return in Form GSTR – 3 and GSTR – 3B has to be furnished electronically through the common portal either directly or through a notified Facilitation Centre.
  3. Prescribed return for Section 39 read with Rule 61(1) is GSTR – 3: On bare perusal of Rule 61 of the CGST Rules, the return prescribed for Section 39 is Form GSTR – 3.  
  4. Notification for Form GSTR – 3B:
    • The Central Board of Indirect Taxes and Customs (‘CBIC’) vide Notification No.17/2017 – Central Tax dated 27 July 2017 has consciously amended the Notification no.10/2017 – Central Tax dated 28 June 2017 retrospectively.
    • As per the amendment, ‘return in Form GSTR-3B being in lieu of Form GSTR-3’ was replaced with ‘Form GSTR-3B being in lieu of Form GSTR-3’
    • Hence, GSTR – 3B if not a return, but a statement to be furnished in the absence of GSTR – 1 and GSTR – 2.
  5. Rule 61(1)(c) – ITC of additional amount in GSTR – 3: As per the provisions of Rule 61(6)(c) of the CGST Rules, any ITC availed after filing of Form GSTR – 3B, which is reflected in the return filed in Form GSTR – 3 has to be credited to the electronic credit ledger of the Registered Taxpayer. Any other discrepancies are permitted to be rectified through the return filed in form GSTR – 3.
  6. Background and objective for introduction of Form GSTR – 3B:
    • The decision to add return in Form GSTR – 3B was taken in the 18th GST Council Meeting held on 30 June 2017.  
    • The reason for introduction is to have ‘shorter return for first two months of roll out’.
    • Form GSTR – 3B has not been introduced as a return in substitute of Return in Form GSTR – 3.
    • Form GSTR – 3B is only a temporary stop gap arrangement till the due date of filing Return in Form GSTR – 3 is notified in the GSTN portal.
  7. GSTR – 3 is the final return for availing additional ITC: TheReturn to be filed in Form GSTR – 3 is the final return for availing additional ITC and discharge additional tax liabilities after filing Form GSTR – 3B.
  8. Last date for availing ITC for FY 2017-18: Accordingly, the last date for availing ITC relating to the invoices issued during the period from July 2017 to March 2018 is the last date for filing of the return in form GSTR – 3 (which is yet to be notified) and not that of Form GSTR – 3B.

3. Arguments of the GST authorities

  1. Due date as per Section 16(4) of CGST Act: As per the provisions of Section 16(4) of the CGST Act the last date to avail ITC for the invoices of a particular financial year would be the due date of filing of return under Section 39 of the CGST Act or Annual Return, whichever is earlier.
  2. Press Release dated 18 October 2018:
    • The Press Release dated 18 October 2018 provides gives clarification regarding last date of availing ITC for the invoices pertaining to FY 2017-18 as per Section 16(4) of the CGST Act.
    • The due date of Annual Return for FY 2017-18 as per Section 44 of CGST Act was is 31 December 2018. However, the same has been extended upto 31 August 2019 due to request from the industry and various stakeholders.
    • The due date of filing of GSTR-3B for the month of September 2018 was 20 October 2018, which was extended till 25 October 2018
    • In view of the above and considering the provisions of Section 16(4) of the CGST Act, the last date for availing ITC for FY 2017-18 should be 25 October 2018
  3. No specific name given to the return to be filed under Section 39: As per Section 39 of the CGST Act, no specific name has been given to the return to be filed under this Section. The only condition mentioned is that the return should contain the details of (i) inward and outward supplies of goods/ services/ both (ii) ITC availed (iii) tax payable and tax paid.
  4. Rule 61(5) permits filing of GSTR – 3B: As per the provisions of Rule 61(5) of the CGST Rule, where the time limit for furnishing returns in Form GSTR – 1 (under Section 37) and Form GSTR – 2 (under Section 38) have been extended, filing of form GSTR – 3B may be notified
  5. GSTR – 3B contains all details required under Section 39: Form GSTR – 3B contains all the details required under Section 39 of the CGST Act i.e. (i) inward and outward supplies of goods/ services/ both (ii) ITC availed (iii) tax payable and tax paid. Hence, Form GSTR – 3B is the return to be filed under Section 39 of the CGST Act.
  6. GSTR – 1 and GSTR – 2A are in the nature of taxpayer facilitation: The Press Release also specifically states that the furnishing of outward details in Form GSTR – 1 by the corresponding supplier(s) and the facility to view the same Form GSTR – 2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of a Registered Taxpayer to avail ITC on self-assessment basis in consonance with the provisions of section 16 of the Act.
  7. Further extension of due date: Subsequently, vide Order No. 02/2018 – Central Tax dated 31 December 2018, the last date for availing ITC has been further extended till the due date of furnishing of the return for the month of March 2019, subject to specified conditions.

4. Observations of the HC

  1. Moot question: The moot question involved for decision is ‘whether the return in Form GSTR – 3B is a return required to be filed under Section 39 of the CGST Act?’
  2. Validity of the Press Release: The Press Release dated 18 October 2018 would be valid and in consonance with Section 16(4) of the CGST Act, only if Form GSTR – 3B is a return required to be filed under Section 39 of the CGST Act.
  3. Return filing contemplated under the GST law:  It was initially decided to have the following three returns in a month:
    • Return for outward supplies i.e., GSTR – 1 (in terms of Section 37)
    • Return for inward supplies i.e., GSTR – 2 (in terms of Section 38)
    • Combined return in Form GSTR – 3 (in terms of Section 39)
  4. Filing of Form GSTR – 2 and Form GSTR – 3: Filing of returns in Form GSTR – 2 and Form GSTR – 3 were kept in abeyance due to technical glitches in the GSTN portal and difficulty faced by the taxpayers
  5. Introduction of Form GSTR – 3B: Form GSTR – 3B was a shorter return order introduced for the initial period.  It was not introduced as a return in lieu of return required to be filed in Form GSTR – 3.
  6. Form GSTR – 3B is a stop gap arrangement: Essentially, Form GSTR – 3B is only a temporary stop gap arrangement till the due date of filing the return in Form GSTR – 3 is notified.
  7. Notifications issued for extension of return in Form GSTR – 3: The CBIC has been issuing notifications from time to time extending the due date of filing of the return in Form GST – 3, i.e. return required to be filed under Section 39 of the CGST Act. It was notified vide Notification No.44/2018 – Central Tax dated 10 September 2018 that the due date of filing the return under Section 39 of the Act, for the months of July 2017 to March 2019 shall be subsequently notified in the Official Gazette.
  8. Reference to ‘return’ amended by CBIC: The CBIC vide Notification No.17/2017 – Central Tax dated 27 July 2017 has consciously amended the Notification no.10/2017 – Central Tax dated 28 June 2017 retrospectively to replace ‘return in Form GSTR-3B being in lieu of Form GSTR-3’ with ‘Form GSTR-3B being in lieu of Form GSTR-3’

5. Judgement of the HC

  • Form GSTR – 3B is not the monthly return contemplated under the provisions of Section 39 of the CGST Act.
  • Para 3 of the Press Release dated 18 October 2018 is contrary to the provisions of Section 16(4) read with Section 39(1) of the CGST Act in turn read with Rule 61 of the CGST Rules.
  • The Press Release dated 18 October 2018 is partly illegal to the extent of Para 3 which purports to clarify that ‘the last date for availing ITC relating to the invoices issued during the period from July 2017 to March 2018 is the last date for the filing of return in Form GSTR-3B for the month of September 2018.

6. Conclusion

The judgement of the HC has serious ramifications across the industry as the validity of Form GSTR – 3B has been questioned to the extent of availing ITC for July 2017 to March 2018. As the very foundation for the legality of monthly returns has been questioned, this judgement may also open a Pandora’s box for validating the other provisions of the GST law having references to Form GSTR – 3B.

It may be noted that the judgement of a HC could be subjected to appeal before the Hon’ble Supreme Court of India. While the judgement of the HC is favourable to the taxpayers, taxpayers may need to adopt a wait and watch approach for further clarifications on the issue. 

It is very likely that the Central Government may file an appeal against the judgement of the HC. Alternatively, the Central Government may also issue a notification in terms of the powers available under the GST law to clarify/ amend the exiting anomaly in a way to reflect that the Form GSTR – 3B shall be considered as a return under Section 39 for the purposes of determining the due date for availing ITC under Section 16(4) of the CGST Act.

Availability of ITC based on reconciliation GSTR 2A and GSTR 3B is unfounded

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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GSTR – 3B is ‘not a return’ under GST law | Applicability of GSTR 3B

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