CBIC clarifies issues in reconciling the differences in amount of ITC claimed in GSTR-3B amount of ITC eligibility as per GSTR-2A in respect of financial years 2017-18 and 2018-19.
During the fiscal years 2017-18 and 2018-19, many suppliers failed to provide the correct details of outward supplies in their FORM GSTR-1, resulting in incomplete FORM GSTR-2As from their recipients. However, the concerned recipients may have claimed input tax credit on the aforementioned supplies in their FORM GSTR-3B returns.
The CBIC has clarified that in such cases, where the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A in respect of a supplier exceeds Rs. 5 lakh, the proper officer shall request the registered person to produce a certificate from a Chartered Accountant (CA) or a Cost Accountant (CMA) certifying that supplies in respect of the said invoices of supplier have actually been made by the supplier to the said registered person. Also, the said supplier has paid the tax on such supplies in his return in FORM GSTR 3B.
In cases where the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A in respect of a supplier is up to Rs 5 lakh, the proper officer shall request that the claimant produce a certificate from the concerned supplier stating that the said supplies were actually made by him to the said registered person and that the tax on said supplies was paid by the said supplier in his return in FORM GSTR 3B.
The instructions in the CBIC clarification circular will only apply to ongoing proceedings in scrutiny/audit/investigation, etc. for fiscal years 2017-18 and 2018-19, not completed proceedings. Furthermore, these instructions will apply in cases where adjudication or appeal proceedings are still pending for fiscal years 2017-18 and 2018-19.
CBIC GST Circular 183/15/2022 dt. 27/12/2022: CBIC clarification on how to deal with the difference in Input Tax Credit (ITC) claimed in FORM GSTR-3B as compared to details in FORM GSTR-2A for fiscal years 2017-18 and 2018-19.
1. Section 16 of the CGST Act 2017 specifies the conditions and eligibility for claiming Input Tax Credit (ITC) under GST. During the initial period of GST implementation, such as fiscal years 2017-18 and 2018-19, many suppliers failed to provide the correct details of outward supplies in their FORM GSTR-1, resulting in deficiencies or discrepancies in the details in their recipients’ FORM GSTR-2A. However, the concerned recipients may have claimed the ITC on the aforementioned supplies in their GSTR-3B returns. The tax officers are noticing discrepancies between the amount of ITC claimed by the recipients in their returns in FORM GSTR-3B and the amount stated in their FORM GSTR-2A during proceedings such as scrutiny/ audit/ investigation, etc., due to the absence of tax credit flowing in FORM GSTR-2A of the said recipients/ registered persons. Such discrepancies are interpreted by tax officers as representing ineligible ITC obtained by registered persons and are flagged for explanation from registered persons and/or reversal of such ineligible ITC.
2. However, it is stated that FORM GSTR-2A was not made available to taxpayers on the common portal during the early stages of GST implementation, whereas the availability of ITC was subject to restrictions and conditions specified in Section 16 of the CGST Act beginning on July 1, 2017. Furthermore, restrictions on the availment of ITC by registered persons beyond the ITC available as per FORM GSTR-2A were imposed under CGST Rule 36(4) with effect only on October 9, 2019. As a result, CBIC has received numerous representations from the trade and tax authorities seeking clarification on how to deal with such discrepancies between the amount of ITC claimed by registered persons in their FORM GSTR-3B and the amount reflected in their FORM GSTR-2A during FY 2017-18 and FY 2018-19.
3. To ensure uniformity in the implementation of GST law provisions, the CBIC, in exercise of its powers under section 168(1) of the CGST Act, has clarified on the following lines:
Scenario 1: When a supplier fails to file FORM GSTR-1 for a tax period but files a return in FORM GSTR-3B for that tax period, the supplies made during that tax period are not reflected in the recipients’ FORM GSTR-2A.
Clarification: In such cases, the registered person may handle the difference in ITC claimed in his return in FORM GSTR-3B and that available in FORM GSTR-2A by following the procedure outlined in paragraph 4 below.
Scenario 2: The supplier has filed FORM GSTR-1 as well as a return in FORM GSTR-3B for a tax period, but has failed to report a specific supply in FORM GSTR-1, resulting in the supply not being reflected in the recipient’s FORM GSTR-2A.
Clarification: In such cases, the registered person may handle the difference in ITC claimed in his return in FORM GSTR-3B and that available in FORM GSTR-2A by following the procedure outlined in paragraph 4 below.
Scenario 3: Where a supply was made to a registered person, and an invoice was issued in accordance with Rule 46 of the CGST Rules, containing the recipient’s GSTIN, but the supplier incorrectly reported the supply as a B2C supply rather than a B2B supply in his FORM GSTR-1, resulting in the supply not being reflected in the registered person’s FORM GSTR-2A.
Clarification: In such cases, the registered person may handle the difference in ITC claimed in his return in FORM GSTR-3B and that available in FORM GSTR-2A by following the procedure outlined in paragraph 4 below.
Scenario 4: Where the supplier has filed FORM GSTR-1 as well as a return in FORM GSTR-3B for a tax period, but he has declared the supply in FORM GSTR-1 with the incorrect GSTIN of the recipient.
Clarification: In such cases, the registered person may handle the difference in ITC claimed in his return in FORM GSTR-3B and that available in FORM GSTR-2A by following the procedure outlined in paragraph 4 below.
Furthermore, the proper officer of the actual recipient shall notify the concerned jurisdictional tax authority of the registered person, whose GSTIN was incorrectly mentioned, that ITC on those transactions must be disallowed if claimed by such recipients in their FORM GSTR-3B. However, the allowance of ITC to the actual recipient is not contingent on the completion of the action by the tax authority of such registered person, whose GSTIN was incorrectly mentioned, and such action will be pursued as a separate action.
4. The proper officer shall first obtain information from the registered person regarding all invoices on which the registered person claimed ITC in his FORM GSTR 3B but which are not reflected in his FORM GSTR 2A. He must then ensure that the following conditions of Section 16 of the CGST Act are met in relation to the input tax credit claimed on such invoices by the said registered person:
i) that he has 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; and
iii) that he has made payment to the supplier for the amount towards the value of supply, including tax payable thereon.
Furthermore, the proper officer must determine whether any reversal of input tax credit is required to be made in accordance with sections 17 or 18 of the CGST Act, as well as whether the said input tax credit was claimed within the time period specified in section 16(4) of the CGST Act.
4.1 In order to verify the condition of Section 16(2)(c) of the CGST Act that tax on the said supply has been paid by the supplier, the proper officer may take the following action:
4.1.1 If the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a supplier for the said financial year exceeds Rs 5 lakh, the proper officer shall request that the registered person produce a certificate from a Chartered Accountant (CA) or a Cost Accountant (CMA) certifying that supplies in respect of the said invoices of supplier have actually been made by the supplier. The UDIN must be included in any certificate issued by a CA or CMA. The UDIN of certificates issued by CAs and CMAs can be checked on the ICAI/ICMAI website.
4.1.2 In cases where the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a supplier for the said financial year is up to Rs 5 lakh, the proper officer shall ask the claimant to produce a certificate from the concerned supplier stating that said supplies were actually made by him to the said registered person and that the tax on said supplies was paid by the said supplier in his return in the said financial year.
4.1.2 In cases where the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person person in respect of a supplier for the said financial year is up to Rs 5 lakh, the proper officer shall ask the claimant to produce a certificate from the concerned supplier stating that said supplies were actually made by him to the said registered person and that the tax on said supplies was paid by the said supplier in his return in the said financial year.
4.2 It should be noted, however, that for the fiscal year 2017-18, as per proviso to section 16(4) of the CGST Act, the aforementioned relaxations shall not be applicable to the claim of ITC made in the FORM GSTR-3B return filed after the due date of furnishing return for the month of September, 2018 until the due date of furnishing return for the month of March, 2019, if the supplier had not furnished details of the said supply in his FORM GSTR-1 till the due date.
5. It should also be noted that the clarifications provided below are case specific and only apply to genuine reporting errors committed during fiscal years 2017-18 and 2018-19. Furthermore, these guidelines are clarifying in nature and should be applied based on the actual facts and circumstances of each case, rather than being used to interpret legal provisions.
6. These instructions will only apply to ongoing proceedings in scrutiny/audit/investigation, etc. for fiscal years 2017-18 and 2018-19, not completed proceedings. These instructions, however, will apply in cases where adjudication or appeal proceedings for such fiscal years are still pending.
In its 50th Meeting held on 11th July 2023, the GST Council has proposed issuing a similar circular to address input tax credit discrepancies for the period from 01/04/2019 to 31/03/2021. This circular will provide guidelines on how to verify and reconcile the input tax credit claimed in FORM GSTR-3B (a summary of monthly GST returns) with the credit available as per FORM GSTR-2A (a statement of inward supplies). The objective is to streamline the process and ensure accurate reporting of input tax credits during the specified period.
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