Right of Input tax credit under Goods & Service Tax Act cannot be denied due to non-reflection of the same in GSTR 2A/2B

[RAJENDRAKUMAR RATHI]

Right of Input tax credit under Goods & Service Tax Act cannot be denied due to non-reflection of the same in GSTR 2A/2B

Input Tax Credit is the core concept of Goods & Service Tax as tax charged on all outward supplies is allowed to be set off against tax paid on all inward supplies. Uninterrupted and seamless flow of credit is one of the key features of GST. It avoids cascading effects of taxes. In old regime taxes levied by Central Govt. is not allowed to be set off against taxes levied by State Governments and vice versa. Original GST mechanism is framed with the concept of matching principles. Suppliers of goods are required to furnish details of outward supply in Form GSRT 1 and recipient has to accept after due verification of the same. The recipient also has the right to accept, reject or modify the same by filing GSTR 2. GSTR 3 will be the final return and registered person has to pay GST if there is no sufficient balance in electronic credit ledger. This mechanism is provided under Section 42 of GST Act rad with Rule 36 and Rule 69. However this mechanism has not yet been implemented. The Government has allowed the registered person to claim ITC on self-declaration basis in summary return in the form of GSTR 3B. After the amendment of Rule 36 with effect from 09.10.2019, there has always been issues regarding matching of ITC claimed in GSTR 3B with data auto populated in GSTR 2A/2B.

Conceptual understanding of GSTR 3B and GSTR 2A

GSTR 3A is a summary return to be filed by all the registered person having turnover of more than 5 Crore on monthly basis. It contains consolidated figures of all outward and inward supplies, output taxes payable, input credit availed and taxes paid. Whereas GSTR 2A is an auto populated form generated for recipient of supplies on the basis of GSTR 1 filed by the suppliers.

The amount of ITC claimed in GSTR 3B must match with details of supplies auto populated in GSTR 2B along with GSTR 2A. If there is difference between ITC claimed in GSTR 3B and ITC auto populated in GSTR 2B/2A, Department may issue notices to assesses seeking reply as to why differential amount be reversed and paid through cash ledger. Failure to satisfactory reply may lead to reversal of ITC along with imposition on interest and penalty.

As per Rule 36(4) which has been inserted w.e.f 09.10.2019, are registered person is entitled to avail upto 105% of GST paid on inward supplies which are uploaded by the corresponding suppliers and reflected in GSTR 2A/2B of the corresponding period of the recipient.

As per Section 42(3), where there is discrepancy between ITC claimed as per GSTR 3B as that appearing in GSTR 2A, the Department has to communicate the same to Both suppliers and recipient.

Section 43A provides procedure for availing ITC on the basis of returns filed by the suppliers and also restricting that total ITC shall not exceed 20% of ITC as available in GSTR 2A/2B.

Further in a press release by CBIC dated 18.10.2018 it is clarified that furnishing of details in GSTR 1 by the suppliers and the facility to view the same in GSTR 2A is in the nature of tax payer’s facilitation and it does not impact the right of recipient to avail ITC on the basis of self-assessment. The government understands the practical difficulties of the present return system and hence vide Circular No. 59/33/2018 Dated 04.09.2018 allowed the tax payers to claim refund of GST by furnishing hard copies of bills even if they are not appearing in GSTR 2A.

With regard to ITC pertaining to period 2018-19, the department cannot deny the ITC if invoices are not appearing in GSTR 2A. Reliance is placed on the judgment of Honorable Delhi HC in the case of ON QUEST MERCHANDISING INDIA PVT. LTD., SUVASINI CHARITABLE TRUST, ARISE INDIA LIMITED, VINAYAK TREXIM, K.R. ANAND, APARICI CERAMICA, ARUN JAIN (HUF) , DAMSON TECHNOLOGIES PVT. LTD., SOLVOCHEM, M/S. MEENU TRADING CO., & MAHAN POLYMERS VERSUS GOVERNMENT OF NCT OF DELHI & ORS. & COMMISSIONER OF TRADE & TAXES, DELHI AND ORS. [2017 (10) TMI 1020 - DELHI HIGH COURT]. The aforesaid judgment was later on affirmed by the Honorable Apex Court.

Even in case ITC pertaining to period after 09.10.2019, the Honorable Kerala High Court in the case of  ST. JOSEPH TEA COMPANY LTD., PARAMOUNT ENVIRO ENERGIES VERSUS THE STATE TAX OFFICER, DEPUTY COMMISSIONER, STATE GST DEPARTMENT, KOTTAYAM, STATE GOODS AND SERVICE TAX DEPARTMENT, GOODS AND SERVICE TAX NETWORK LTD. [2021 (7) TMI 988 - KERALA HIGH COURT] has examined the fact of the case and ordered that ITC cannot be denied on the ground that the transactions are not appearing in GSTR 2A.

In M/S. D.Y. BEATHEL ENTERPRISES VERSUS THE STATE TAX OFFICER (DATA CELL) , (INVESTIGATION WING) COMMERCIAL TAX BUILDINGS, TIRUNELVELI. [2021 (3) TMI 1020 - MADRAS HIGH COURT] has quased the order passed by the GST officer demanding the entire tax liability form the purchaser without involving the seller, where payment of GST has already been made by the buyer and same has not been remitted by the seller to the government. Non remittance of GST the seller should have been viewed very seriously and strict action ought to have been taken against the seller.

Department has every mechanism to recover tax from the defaulters under Section 73, 78 and 79. Department can attach bank account or even the property of the defaulter following due procedure and initiate recovery of GST.

Considering the judgments of the various courts, the department shall first recover GSt from defaulting sellers and not from the recipient. Rules, circulars, notification are issued for the smooth implementation of the provisions of the law but cannot override or overrule the express provisions of the statute.