Conditions to claim Input Tax Credit in GST

[Ganeshan Kalyani]

Documentary evidence: The recipient is allowed to take input tax credit if he has in his possession a tax invoice issued by the supplier of goods or services or both. The invoice should contain the particulars as stipulated in the provision i.e. name, address, GSTIN of the supplier, serial number not exceeding sixteen digits, date of issue, name, address, GSTIN of the recipient, HSN, description of goods or services, quantity, total value of supply of goods or services or both, taxable value, rate of tax, tax, place of supply, whether payable under reverse charge, signature or digital signature.

It is also provided that if the invoice contains minimum specified details like tax, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and the recipient and place of supply in case of inter-State supply input tax credit will be allowed.

GST should have been paid by the supplier: The recipient of goods and services can avail Input Tax Credit only if supplier has deposited the tax with Government either in cash or through utilization of Input Tax Credit. There is no online mechanism to ensure that the supplier has deposited the tax which he collected from the recipient by charging on the tax invoice. The recipient however can check the status of filing of return of that supplier in GSTN under search taxpayer option which displays the date of filing of GSTR-3B/GSTR-1. The filing of GSTR-3B denotes that tax has been paid by the supplier. System does not allow the supplier to file GSTR-3B without payment of tax. The system is so designed by the Government that it triggers for the payment when there is shortfall of Input tax credit to offset against the tax liability. Since, the onus to prove the eligibility of input tax credit lies with recipient it becomes his job to ensure that the supplier has paid the tax.

Invoice should have been uploaded by the supplier in his GSTR-1: The method of claiming input tax credit proposed was such that the supplier of goods and services shall upload the tax invoice in his GSTR-1 on monthly or quarterly basis. The invoices so uploaded by him will populate in GSTR-2A of the recipient and the recipient has to accept the invoices online and the accepted invoices will become eligible input tax credit. However the proposed system of claiming input tax credit did not come into effect. Thus it was allowed that input tax credit can be claimed on self assessment basis through GSTR-3B. The input tax credit declared in the said return will get reflected in electronic credit ledger. The credit appearing in the said ledger is allowed to offset against GST payable.

Though the input tax credit is on self assessment basis the input tax credit claimed cannot be more than the credit appearing in GSTR-2A report. This restriction has been enabled in GST Annual return form. Thus if a supplier has mistaken to upload the invoices within the extended time period in his GSTR-1 then credit in GSTR-2A will be less in annual return and the recipient will shown that credit as claimed in GSTR-3B. The system will throw an error and recipient will have to pay the tax thru GST DRC-03. This implies double tax outflow from the recipient first being the tax component paid to the supplier along with the value of goods and second payment thru DRC-03.

Taking this as lesson a recipient can verify the compliance of the supplier in GSTN before entering into a contract of buying goods and/or services. And if there is a monopoly of the supplier in a particular goods and or service then the amount proportionate to tax should be retained while releasing his payment. This will enable the recipient to mitigate his loss because of invoice not uploaded by the supplier.

Input tax credit on invoices pertaining to a particular financial year to claim up to filing of GSTR-3B for the month of September following the financial year: The GST provision puts a restriction on the recipient by allowing him to claim input tax credit on the invoices pertaining to previous financial year up to the filing of GSTR-3B for the month of September following the financial year. Thus the Government gives six months time limit for the recipient to ensure that he has claimed all the eligible input tax credit. This time period is also to be utilized by the recipient to match GSTR-2A report with his input tax credit register and if he find out that the supplier has not uploaded any invoices in his GSTR-1 then he should be asked to upload the missing invoices.

The recent decision of Hon'ble Gujarat High Court pronounced on 24.06.2019 in case of AAP and Co., Chartered Accounts thru authorised partner versus Union of India states that the time limit for claiming input tax credit till September month of following year is linked with GSTR-3 and not GSTR-3B. Presently GSTR-3B is operative and it is not a return in place of GSTR 3 but it is temporary return to fill the gap till GSTR 3 becomes operational.  Hence, recipient can claim input tax credit till filing of annual return. However, a recipient will invite litigation if he consider this decision as a ground to claim credit of the invoice pertaining to F.Y.2017-18.

Payment to the supplier: The recipient of goods or services or both has to make the payment of the value of invoice (both value of goods and tax) to the supplier of goods or services or both in order to become eligible to claim input tax credit. The recipient has to make the payment within 180 days from the date of issue of invoice by the supplier. If he does not make the payment then he is suppose to reverse the already claim input tax credit. He can reclaim that credit once he settle the payments to the supplier. In the assessment the vendor ledger can be called for to find out the time gap of the payment and if they find any delay and the recipient has not reversed the credit then interest will be charged. And if from that scrutiny it is found that payment toward a particular invoice is not paid at all till date then recipient will be asked to reverse the credit and payment of interest. Hence, it is essential for the recipient to make the payment to the supplier within the stipulated time.