GST CIRCULAR SIMPLIFIES PROCESS OF LITIGATING AGAINST PAST GST NOTICE

CA Gaurav

Kenkre is a CA in practice for the last 11 years. He is a regular speaker at various professional organizations, trade bodies, MNCs and Government bodies. He also writes regularly in local as well as national publications. Besides this he holds various positions in bodies such as ICAI, GCCI, College bodies, Rotary etc.

In the previous 5 editions we covered some legal provisions regarding to claim of Input Tax Credit. For the next two editions we will pause our discussion relating to the law as it stands, and instead divert our attention to two latest amendments which have come in respect of input tax credits. Both these amendments are as a result of the 48th GST Council meeting held in December 2022 and have wide ramifications. The first change is in the form of a Circular.

Most businesses may have received notices from GST department asking them to reverse Input Tax Credits in respect of invoices which have and eventually withdrawn. Businesses also could not fully comply with this requirement since GST was just being implemented.

Inspite of the above legal position, GST department was continuing to issue notices for this “mismatch”. This had caused lot of hardship to taxpayers. Now, to provide some respite, a circular has come to explain to tax-officers, how to deal with this “mismatch”.

Firstly, in my view, although the circular does not directly say it, if you read between the lines, the circular suggests that the department admits that there was no direct legal provision for such “matching” for the financial compliance with other provisions of Section 16(2) i.e. possession of an invoice, receipt of goods/services and payment to supplier.

To verify the compliance with Section 16(2)c (i.e. the requirement that supplier has paid GST), officer must do as below: a. Where the difference in Input Tax credit as claimed and GSTR 2A exceeds Rs 5 lacs in a Financial Year – Rely on a certificate by a Chartered Accountant (CA) or the 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 and the tax on such supplies has been paid by the said supplier in his return in FORM GSTR 3B. b. Where the difference in Input Tax credit as claimed and GSTR 2A is less than Rs 5 lacs in a Financial Year – Rely on certificate from the concerned supplier to the effect that said supplies have actually been made by him to the said registered person and the tax on said supplies has been paid by the said supplier in his return in FORM GSTR 3B

While this is a welcome step some important issues may need further study – T not been uploaded by the supplier in his GSTR 1 i.e. since they have not been uploaded in the GSTR 1, they are not appearing in the GST portal (i.e. GSTR 2A) of the recipient. Such demands have mostly been made for the Financial Years 2017-18 and 2018-19. During this period, the law originally envisaged such “matching” of input tax credits (i.e. every input tax credit which was to be claimed, had to appear in your GST portal, as a result of correct filing by your supplier). However, since the portal was not able to keep up with the demands of the law, some parts of the legal requirements were “suspended” years 2017-18 and 2018-19. This is consistent with my views as well. Then, the circular links this “matching” to the requirement of “supplier paying the GST”. We had discussed this in a previous edition where we had mentioned that the GST law requires that unless the supplier pays the GST, the recipient cannot claim it. In my view, the concept of “matching” i.e. supplier uploading an invoice has nothing to do with supplier paying GST thereon i.e. a supplier may upload an invoice yet not pay the GST thereon and vice versa. Be that as it may, the circular provides a way out for all the notices of “mismatch”. It states that that an officer should verify a. The circular says that the certificate can state that taxes have been paid via GSTR 3B. What if the supplier had paid the said taxes via means other than GSTR 3B i.e. Form DRC 03 especially during finalisation of his annual returns? b. Is it practical to go back to each supplier who supplied goods or service 4 to 5 years ago, ask him to provide a certificate (either selfcertificate or CA certificate)?

Where the difference in GST is no material, this route may prove to be more cumbersome than simply paying the GST liability. Although the circular is not perfect, it will surely provide relief to many taxpayers.

By Norbert D’Souza