Appeal to CBIC to discontinue Matching of GSTR 2A and GSTR 3B and extend due date u/s 16(4)

Date: October 16, 2018

Dear Sir,

Greetings of the day !!

First of all I would like to congratulate you and your team for tremendous efforts made for implementation of Goods and Services Tax in India. Our country has been able to adapt the paradigm change in the indirect tax laws smoothly.

These days GST departments are asking their respective jurisdictional taxpayers to reconcile the Input Tax Credit between GSTR 2A and the amount claimed in GSTR 3B. Being a consultant working on GST since October 2015, I would like to bring certain anomalies in this procedure being adopted by the GST Departments. 

1.     The matching of Input Tax credit between GSTR 3B and GSTR 2A and subsequent reversal on account of unmatched credit is not sustainable as per Law. Section 16 of the Act lays down following requirement for claim of Input Tax Credit:

i)                   Taxpayer is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying document as may be prescribed;

ii)                Taxpayer has received the goods or services or both;

iii)             Subject to provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

iv)              He has furnished the return under section 39,

Therefore as per Law, vital condition is that tax should be actually paid by the outward supplier. Your good-self would agree that the tax is paid as per return GSTR 3B and not GSTR 1. Whereas the GSTR 2A of the inward supplier is auto-populated on the basis of GSTR 1 filed by the outward supplier. Therefore by virtue of GSTR 2A, whether tax has been actually paid to government cannot be determined.

There are various situations where the amount could be reflected in GSTR 2A despite the fact that the outward supplier has not paid tax to the government or vice-versa or the same is not permitted as per law:

i)                   Regular Filing of GSTR 1 but non filing of GSTR 3B

ii)                GST Reflected in GSTR 2A on account of blocked credits u/s 17(5) of the Act;

iii)             Outward supplier reflecting the B2B supplies under B2C supplies (same will not get reflected in GSTR 2A)

iv)              The number of the outward supplier has been cancelled but invoices had been issued when the same was active

v)                Wrong GSTIN entered while filing GSTR 1 in case of group companies/distinct person

vi)              Failure in uploading of credit/debit note or uploading net figures while filing of the return.

Your good self would notice that in all of the above circumstances GSTR 2A could not be allowed as a tool for claim of input tax credit. Moreover, it no way determines whether government has received the tax against said supply or not.

Even As per section 16, there is no condition that the said amount should be reflected in GSTR 2A, only then the input tax credit can be permitted.

2.     Further since GSTR 2 and GSTR 3 has been suspended, the 1^st proviso to Rule 69 prescribes that where the time limit specified under section 37(GSTR 1 ) and section 38(GSTR 2) has been extended, the date of matching relating to input tax credit shall also be extended.

Again as per Rule 69, since the return GSTR 2 has been suspended, the matching relating to input tax credit automatically becomes defunct. In such a scenario, department pushing the taxpayers to match such credit is bad in law.

3.     Further as per Rule 71 of CGST Rules 2017, the GST department was required to communicate any discrepancy in the invoices as uploaded by outward supplier and claimed by inward supplier in form GST MIS-1 (to be issued on monthly basis to Inward Supplier) and GST MIS-2 (to be issued on monthly basis to Outward Supplier). Based upon such GST MIS-1 and GST MIS-2,the parties to the supply was required to rectify such discrepancy and go ahead with filing of GSTR 3.

We know that since GSTR 2 and GSTR 3 along with matching was suspended, the department did not issue such MIS – 1 or MIS -2, but in this scenario calling upon the taxpayers to reconcile and match invoices in GSTR 2A and GSTR 3B, does not stand good in the law. Being first year, reconciliation had been problematic equally for taxpayers as well as tax department. Where the department had itself not issued GST MIS 1 or GST MIS 2 the taxpayers cannot be asked to find the discrepancies and rectify them by themselves. 

4.     Also as per the circular 59/33/ 2018-GST dated 4^th September 2018, issued by the government in respect of refund, it has been instructed to the department that no invoices for claim of input tax credit can be called upon when they are reflected in GSTR 2A. But where any such invoices are not found in GSTR 2A, department can call for manual invoices and based upon the scrutiny of such invoices, the refund can be processed. So in such case where the department itself agrees that refund of input tax credit can be claimed based upon valid tax invoice in possession of taxpayer, then how the can the same be denied as input tax credit against the outward tax payable by such taxpayer.

Department must have same position with respect to claim of input tax credit whether claimed as refund or allowed as setoff against output liability.

5.     Also your good self is already aware that GST portal had mal functioned at times causing problems for both taxpayers and tax department. We understand that since portal is in nascent stage, such mal functioning is bound to happen. For the taxpayer who had issued invoices in FY 2017-18 and not their number has been subsequently cancelled, portal is not reflecting any data filed by then in GSTR 1 or GSTR 3B. In such a case their customers are posing difficulties in matching the invoices issued by such registered persons. Since non availability of data in GSTR 1 has also deleted the data in GSTR 2A of respective inward suppliers leading to mis-match issues.

6.     Sir, As per section 16(4) maximum time for claim of input tax credit in respect of invoice FY 2017-18 is due date of filing of GSTR 3B for the month of September 2018. Since the due date for GSTR 1 for period of July 2017 to September 2018 has been extended till 31^st October 2018, it is impossible for the taxpayer to reconcile all their input tax credits. Therefore it is requested that the due date u/s 16(4) for the Financial Year 2017-18 be extended to 20^th November 2018 to bring it in consistency with the due dates of GSTR 1.

Sir, in lieu of the above submissions and the practical difficulties being faced by trade and industry in matching GSTR 2A and GSTR 3B, you are requested to issue immediate orders to discontinue such matching. Your support and instructions would go a long way in providing relief to the taxpayers from an unlawful convention being commenced by the GST Departments.

Further I assure my full support and would remain open for discussion and deliberations.

High Regards

CA. Keshav R Garg

(B.Com, FCA, CS, ISA(ICAI))

Author: Bharat's GST Ready Reckoner

            A Handbook on GST

Member: Indirect Tax Committee of CII, 

Founder: MyGst.MyTax Foundation

Adviser: Industries Association of Chandigarh

Adviser: Chambers of Chandigarh Industries

Address: 3328, First Floor, Sector 27 D, Chandigarh, India - 160 019

Phones: +91-172-461-3328, +91-98880-90008

Mail: keshavgarg@kdai.in