Clarification on the manner of dealing with differences in ITC availed FORM GSTR-3B Vs ITC reflecting in GSTR-2A for FY 2017-18 and 2018-19

Clarification on the manner of dealing with differences in ITC availed FORM GSTR-3B Vs ITC reflecting in GSTR-2A for FY 2017-18 and 2018-19

The issue around the basic tool of GST, i.e., matching ITC availed by the taxpayer in his GSTR-3B with ITC auto-populating in GSTR-2A is ongoing and the department is coming up with various amendments and clarifications to streamline the system. Taxpayers have faced various notices or alerts from the department because of this difference.

Now when the department has commenced the assessment of FY 2017-18 and 2018-19, ITC disallowance on grounds of Invoices not appearing in GSTR-2A has become common. Since 2017-18 and 2018-19 were the initial years of GST implication and taxpayers were also not well versed with the GST system, therefore, taxpayers have approached the department to clarify how to deal with these invoices which suppliers has failed to report in his GSTR-1 as disallowing this ITC will cause genuine hardship to the taxpayers.

Considering the representations received, the department has clarified that how the difference should be dealt of Input Tax Credit appearing in GSTR-2A and ITC claimed in GSTR-3B for FY 2017-18 and 2018-19 vide Circular No. 183/15/2022-GST dated 27th December, 2022, wherein following points are clarified:

1. Issue Involved

  • During the initial period of implementation of GST, i.e., during F.Y. 2017-18 and 2018-19, in many cases, the suppliers have not furnished correct details of outward supplies in FORM GSTR-1 and such non-disclosure has led to certain deficiencies or discrepancies in FORM GSTR-2A of their recipients.
  • Since recipients were available with the invoices and corresponding inward supply of goods or services, therefore, they may have availed ITC of such supplies while filing GSTR-3B.
  • Now, during assessment or audit, or investigation, the tax officers have noticed the difference in ITC appearing in GSTR-2A and ITC claimed in GSTR-3B.
  • Tax officers considered such discrepancies as ineligible ITC availed by the taxpayers and flagged such amounts for seeking clarification or asked for a reversal of such ineligible ITC along with interest.
  • Also, during the initial period, GSTR-2A was not available to taxpayers on the GST portal. Therefore, taxpayers were not able to check whether the counterparty has reported their supplies correctly in GSTR-1.
  • Further, Rule 36(4) of CGST Rules, which provides for a certain limit up to which ITC can be availed beyond ITC appearing in GSTR-2A, came into effect from 1st October 2019 itself.
  • However, ITC was available subject to restrictions and conditions given under Section 16 of the CGST Act and such section was applicable from 01.07.2017 itself.
  • Therefore, the department received various representations from trade as well as the tax authorities, seeking clarification regarding the manner of dealing with such discrepancies during FY 2017-18 and FY 2018-19.

2. Scenarios, where differences in ITC as per GSTR-2A and ITC availed as per GSTR-3B, arised

Following are the possible scenarios where ITC do not get reflected in the GSTR-2A of the recipient:

ScenariosStatus of GSTR-1 of Supplier of a tax periodStatus of GSTR-3B of supplier of the corresponding tax periodIssue involved
Scenario-1Not filedFiledITC of supplies made during such tax period do not get reflected in GSTR-2A of any of the recipient
Scenario-2Filed(But failed to report certain supplies)FiledITC of supplies not reported in GSTR-1 do not get reflected in GSTR-2A of the recipient
Scenario-3Filed(But supplies made to registered persons were disclosed as B2C supplies instead of B2B Supplies)FiledITC of supplies incorrectly reported in GSTR-1 do not get reflected in GSTR-2A of the recipient
Scenario-4Filed(But supplies declared with Incorrect GSTIN, i.e., GSTIN of some other person)FiledITC of supplies incorrectly reported in GSTR-1 do not get reflected in GSTR-2A of the recipient

3. Action to be taken by Proper Officer during audit or Investigation or scrutiny

  • 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 reflected in his FORM GSTR 2A. 
  • He shall then ascertain whether the following conditions of Section 16 of the CGST Act has been complied with such invoices:
  1. That recipient is in possession of a tax invoice or debit note issued by the supplier or any other tax-paying documents;
  2. That he has received the goods or services or both;
  3. that he has made payment for the amount towards the value of supply, along with tax payable thereon, to the supplier.
  • The proper officer shall also check whether any ITC reversal is required under sections 17 and 18 of the CGST Act and also whether such ITC is availed within the time limit prescribed u/s 16(4) of the CGST Act.
  • To ensure that the condition given u/s 16(c) of CGST Act has been complied with, i.e., tax on the said supply has been paid by the supplier, the proper officer may take the following action:
CaseAction to be taken
Difference in ITC claimed in GSTR-3B and ITC reflecting in GSTR-2A is more than INR 5 Lacs1. The proper officer shall ask the registered person to obtain =a certificate for the supplier.
2. Such certificate shall be issued by Chartered Accountant (CA) or the Cost Accountant (CMA) certifying that supplies in respect of the invoices not appearing in GSTR-2A of the recipient have actually been made by the supplier to the said registered person.
3. Further, tax on such supplies has been paid by the said supplier in his return in FORM GSTR 3B
4. Certificate issued by CA or CMA shall contain UDIN. 
5. UDIN of the certificate issued by CAs can be verified from the ICAI website https://udin.icai.org/search-udin and that issued by CMAs can be verified from the ICMAI website https://eicmai.in/udin/VerifyUDIN.aspx 
Difference in ITC claimed in GSTR-3B and ITC reflecting in GSTR-2A is upto than INR 5 Lacs1. The proper officer shall ask the claimant to produce a certificate from the concerned supplier.
2. Supplier shall certify that said supplies have actually been made by him to the said registered person.
3. Further, the tax on such supplies has been paid by the said supplier in his return in FORM GSTR 3B.

Additional Conditions:

  1. However, for the period FY 2017-18, as per proviso to section 16(4) of the CGST Act, the aforesaid relaxations shall not be applicable to the claim of ITC made in the FORM GSTR-3B 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 the 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.
  2. Further, clarifications given in this circular are case-specific and are applicable to the bonafide errors committed in reporting during FY 2017-18 and 2018-19. 
  3. Also, 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.
  4. Instructions will apply only to the ongoing proceedings in scrutiny/audit/ investigation, etc. for FY 2017-18 and 2018-19 and not to the completed proceedings. 
  5. Also, these instructions will apply in those cases for FY 2017-18 and 2018-19 where any adjudication or appeal proceedings are still pending.

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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