GSTR 2A and GSTR 3B during 2018-19

[K Balasubramanian]

1) Introduction: As the extended deadline as provided under section 73(10) of the CGST Act, 2017 pertaining to the Financial Year 2018-19 ended on 30/04/2024, several orders have been passed confirming the demand of Tax, Interest as well as 10% of penalty during April 2024. What is surprising is that while passing such adjudication orders, the Adjudicating Authorities have neither considered the Circular No: 183/15/2022 GST dated 27/12/2022 issued by the GST policy wing nor taken in to consideration the legal provisions as contained in Section 16 of the CGST Act 2017 as well as Rule 36(4) of the CGST Rules as the law stood during the Financial Year 2018-19.

2) Rule 36: The Rule 36 is on Documentary requirements and conditions for claiming input tax credit. The fact that this Rule 36 has seen 12 amendments up to 01/10/2022 itself gives us a message that the Rule as it stood as on 01/07/2017 was ambiguous.

3) 36(4): It is to be noted that sub rule 4 of Rule 36 was inserted for the first time on 09/10/2019 through Notification No. 49/2019 –Central Tax dated 09/10/2019. Subsequent to such insertion, there were certain restrictions which is elaborated further in CBIC Circular Number 193/05/2023-GST dated 17/07/2023. Accordingly, even the 20%, 10% and 5% restrictions as contained in Sub Rule 4 of Rule 36 were also not applicable prior to 09/10/2019.

4) Section 16: This section is on eligibility and conditions for taking input tax credit and it has seen about 10 amendments up to 01/10/2023 and we need to focus on the required conditions as stood up to 31/03/2019 for moving forward. The said conditions are contained in sub section 2.

5) CONDITIONS: Sub Section 2 stipulates the following conditions for taking input tax credit.

a) Possession tax invoice/debit note/ any other document as may be specified.

b) Receipt of goods/services or both as the case may be

c) Tax is paid to the Government

d) The recipient has furnished the return under section 39.

These were the only conditions that were prescribed for taking input tax credit as on 31/03/2019.

6) Subsequent Amendments: This section has around ten amendments subsequently, the crucial one for our discussion being insertion of clause aa with effect from 01/01/2022 through Finance Act 2021. This amendment reads as below:

(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.

7) Let us now focus our attention to para 3, 4 and the circular referred in para 1. Though the Rule imposing restriction on taking input tax credit, as the department claims to be in force since 01/07/2017, was in force during 2018-19, the Section 16 (2)(aa) on the said restrictions were inserted for the first time only on 28/02/2021 through the Finance Act 2021 and brought in to force with effect from 01/01/2022. This fact is evident from clause number 109 of the Gazette Notification dated 28/03/2021 and Notification Number 39/2021 central tax dated 21/12/2021

8) Accordingly, the restriction that credit can be availed through GSTR 3B only if the same is reflected in GSTR 2A itself is having legal force only from 01/01/2022.

9) Even when we assume that (WITHOUT ADMITTING) there was a legal force on the requirement of reflection in GSTR 2A, for rightful Availment of ITC during 2018-19, there were several guidelines set out on 27/12/2022 as per the Circular 183/15/2022 GST. Let us examine the said Circular in the coming paras.

10) Para 4 of the said circular is reproduced below for further deliberation. 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:

i) that he is in possession of a tax invoice or debit note issued by the supplier or such other tax paying documents;

ii) that he has received the goods or services or both;

iii) that he has made payment for the amount towards the value of supply, along with tax payable thereon, to the supplier.

11) However, orders are being passed keeping wholly in mind only the deadline, in violation of the fact that there was no legal force for such restriction up to 31/12/2021 and also not giving any value to the Circular on the identical subject.

12) Conclusion: The tax payers who have been served with adjudication orders confirming the demand as proposed in SCN should act quickly to file Appeal against the adjudication orders without waiting for the deadline to approach. They have a very strong case based on the legal provisions.

13) When a tax payer reads an adjudication order, prima facie, gets a view that there are several lapses on the tax payers part and tempted to settle the issue by paying demand in full to buy peace. What they do not know is the lapses from the department are also EQUAL, if not MORE.

 

Discussions to this article

[Sadanand Bulbule]

Dear Sir

Well analysed article on the most confused subject.

Gratitude and regards