Whether ITC for FY 2017-18 can be availed only till October 20, 2018

[Bimal jain]

Considering the first year of implementation of GST, major challenge is being faced by the Industry Inc in availing GST input tax credit (“ITC”) for the financial year 2017-18 after implementation of GST (i.e. July 2017 to March 2018) and lot of divergent views are floating with respect to the last date till which such ITC can be availed.

Amongst others, most prominent apprehension is that the ITC for the period July 2017 to March 2018, can be claimed on or before due date of filing of the return in Form GSTR-3B for the month of September 2018, which is October 20, 2018. This view is engendered in the light of provisions of Section 16(4) of the CGST Act, 2017 (“the CGST Act”), which draws a time limit to avail ITC for a financial year as the earliest of due date of furnishing return under Section 39 for the month of September following the end of such financial year or furnishing of relevant annual return, whichever is earlier.

So following questions emerging for our GST Charcha:

• Can it really be said that filing of return in Form GSTR-3B for September month will invoke the time lines of Section 16(4) of the CGST Act?
• Whether return in Form GSTR-3B be made equivalent to earlier envisaged monthly return in Form GSTR-3?

Many such questions are evolving, giving rise to multiple angles of legal interpretation of provisions of the GST law.

This article deciphers this issue to critically examine various provisions of the GST Act and Rules made thereunder read with the concept of ITC matching & mis-matching for determination of time period for ITC availment.

Legal provisions under the CGST Act and Rules:

In terms of Section 16(4) of the CGST Act, “a registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier”.

Section 39 of the CGST Act, deals with the monthly return to be filed electronically, for every calendar month or part thereof, in such form and manner as may be prescribed, of inward and outward supplies of goods or services, ITC availed, tax payable, tax paid and other prescribed particulars, on or before the 20^th day of the month succeeding such calendar month or part thereof.

In this regard, Rule 61(1) of the CGST Rules, 2017 (“the CGST Rules”), prescribes Form GSTR-3 as the return to be furnished under Section 39(1) of the CGST Act.

Further, Rule 61(5) provides that where the time limit for furnishing of details in Form GSTR-1 under Section 37 and in FORM GSTR-2 under Section 38 has been extended and the circumstances so warrant, the Commissioner may, by notification, specify the manner and conditions subject to which the return shall be furnished in Form GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

It is worthwhile here to note that Rule 61(5) of the CGST Rules was amended vide Notification No. 17/2017 – Central Tax dated July 27, 2017 (w.e.f. July 1, 2017), before which it read as “(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38 has been extended and the circumstances so warrant, return in FORM GSTR-3B, in lieu of FORM GSTR-3, may be furnished in such manner and subject to such conditions as may be notified by the Commissioner.”

Furthermore, first proviso to Rule 69 of the CGST Rules states that where the time limit for furnishing Form GSTR-1 specified under Section 37 and Form GSTR-2 specified under Section 38 has been extended, the date of matching relating to claim of ITC shall also be extended accordingly.

Analyses on last date to avail ITC:

In view of the above discussed provisions, following views are possible in the context of last date to avail ITC for the period from July 2017 to March 2018:

• ITC for FY 2017-18 can be availed till the date of furnishing Annual return (i.e. December 31, 2018) - Section 16(4) of the CGST Act talks about the return filed under Section 39, which is Form GSTR-3 as per Rule 61(1) of the CGST Rules. Hence, Form GSTR-3B cannot be assumed to be a substitution for Form GSTR-3. Though, Rule 61(5) as amended provides that where the time limit for furnishing details in Form GSTR-1 and Form GSTR-2 has been extended, the Commissioner may specify the manner and condition subject to which the return shall be furnished through Form GSTR-3B.

Therefore, the last date for availing ITC of any invoice/debit note for a financial year 2017-18, would be the earlier of the due dates for filing the GSTR-3 for September 2018 or furnishing of Annual Return for the year 2017-18.

In so far as Section 39 is concerned which refers to GSTR-3, the time limit for filing the same has been continuously extended from time to time and as on date remains suspended for unknown period of time.

Hence, the time limit contemplated in Section 16(4) of the CGST Act must be referred to as the date of furnishing annual return for financial year 2017-18 (i.e. December 31, 2018), in the light of GSTR-3, which is the return prescribed under Section 39 and being suspended; and GSTR-3B not being the return referred to in Section 39 of the CGST Act.

• ITC for FY 2017-18 can be availed till the extended date of filing Form GSTR-1 (i.e. till October 31, 2018) - Recently the Govt. vide Notification No. 43 & 44/2018 – Central Tax dated September 10, 2018 has extended due date for filing of GSTR-1 for the assessees having aggregate turnover more than 1.5 crores for the period July 2017 to September 2018 and for taxpayers having aggregate turnover up to ₹ 1.5 crores, for the quarters from July, 2017 to September, 2018, till October 31, 2018.

Further, vide Notifications No. 45 to 47/2018 – Central Tax dated September 10, 2018, due date of GSTR-1 and GSTR-3B for taxpayers who are migrating to GST as per procedure specified in Notification No. 31/2018 – Central tax dated August 6, 2018 was extended till December 31, 2018 for the period July 2017 to November 2018.

Going by the provisions of first proviso to Rule 69 of the CGST Rules, a view may be taken to state that since the time limit for furnishing Form GSTR-1 has been extended till October 31, 2018 for July 2017 to September 2018, while Form GSTR-2 remains suspended, the date of matching relating to claim of ITC shall also be extended accordingly till October 31, 2018 for all regular taxable persons and till December 31, 2018 in case of recently migrated taxpayers as per procedure specified in Notification No. 31/2018 – Central tax dated August 6, 2018.

Certain Operational Issues viz-a-viz Law provisions:

• Credit taken in books in the month of September 2018 while GSTR-3B for September month is filed with late fees till October 31, 2018 – Reading in line with liberal interpretation of Section 16(4) of the CGST Act and assuming GSTR-3B as the return filed in lieu of Form GSTR-3 [which was contemplated in Rule 61(5) prior to retrospective amendment therein], a conscious view may be taken to defer filing of GSTR-3B for September 2018 till October 31, 2018, so as to avail all eligible credit for FY 2017-18 in the return filed for September month. At the same time, avail ITC in books in the month of September so as to fit within the time lines for availing credit as prescribed in Section 16(4) of the CGST Act.

But, this option will entail corresponding implications of late fees for delayed filing of Form GSTR-3B for September month as well as interest @ 18% per annum on delayed payment of taxes.

• Credit taken in GSTR-3B of September 2018 but entry passed in books in the month of October 2018 due to closure of books for the month of September – Continuing with the above liberal interpretation of Section 16(4) of the CGST Act, one may consciously defer to file GSTR-3B for September till October 31, 2018, but it may happen that books of the Company for FY 2017-18 is closed by 30^th September, 2018 and accordingly, any such entry booked in the month of October 2018, while ITC as per GSTR-3B will be reflected in the month of September, 2018. In such cases, there will be a reconciliation issue while filing Annual Return in Form GSTR-9 and GST Audit Report in Form GSTR-9C, in addition to late fees and interest as discussed supra.

Suitable clarification required from the CBIC to clear the mist:

It is highly important that the Government should come out with suitable clarification on last date till when the ITC for July 2017 to March 2018 can be availed. Apart from considering the legal jigsaw of multiple provisions under the CGST Act and Rules made thereunder, due consideration is also required to the fact that multiple date extensions in filing Form GSTR-1 is creating random changes in Form GSTR-2A of recipient and hence the taxpayers are not in position to get confirmed status of their GSTR-2A as on October 20, 2018. Further, the task of verifying invoices by businesses on the basis of GSTR-2A generated on the GST portal, which was earlier envisaged to be done electronically through mechanism of GSTR-2 and GSTR-3 which could not be put in place, is proving to be hell lot tedious, specially in case of large organisation having thousands of vendors and thus voluminous data of ITC reconciliation.

In terms of Section 172 of the CGST Act, the Government is allowed to issue a general/ specific order to remove difficulty arising in giving effect to provisions of the CGST Act. Hence, a suitable order may be issued under the said Section wherein assessees could be allowed to claim such credit upto the date of furnishing annual return in Form GSTR-9 (i.e. December 31, 2018) for financial year 2017-18 which is in line with the provisions contained in Section 16(4) of the CGST Act read with Rule 61 of the CGST Rules (as amended).