ITC and GSTR 3B-2A Data Mismatch Brings Notice To The Taxpayers

The increase in the frequency of notices served for mismatch of input tax credit (ITC) claimed in the GSTR-3B forms filed by the taxpayer against that of the auto-generated GSTR-2A form must clear all doubts that exist regarding the efficiency of GST. Powered by the GSTN, India’s new indirect tax regime seems to deliver on its promise of an automated, bias-free and completely digital taxation system. Reportedly, the assessees have been granted 10 days for explaining the discrepancies detected.

However, this does not mean that all assessees are on the wrong side. Experts say that there may be many reasons that can be attributed to the increasing cases of discrepancies. A major talking point is the use of GSTR- 2A which is auto-populated and is tamper proof. This means that the GSTR-2A is non-editable.  However, the self-generating form was suspended by the GST Council in November 2017 and since then remain unused by taxpayers.

How is the GSTR-2A Generated?

The GST Network self-generates the GSTR-2A. The GSTR-2A extracts taxpayers data based on two other forms:-

• GSTR-3B: The monthly self-declaration of Tax Liabilities filed by the Taxpayer.
• GSTR-1: Filed on a monthly or quarterly basis and contains sales details of dealers

The GSTR-2A is independent of the information furnished in the GSTR-3B. The GSTR-2A auto-populates itself based on the information furnished in the GSTR-1 form by the sellers of assessees. By cross-checking the ITC Claims made by the assessee in GSTR-3B with respect to the ITC available on all the purchases made by an assessee as per the information captured by GSTR-2A, any mismatch can easily be detected.

The GSTR 2-A was meant to increase transparency between the suppliers and the buyers. The latter enjoys the freedom of opting for a seller/supplier based on his tax liabilities. For a hassle-free ITC claim, the buyers can now pre-ensure that the specific supplier files his tax liabilities on a timely basis. GSTR-2A expedites the ITC claim for the buyers. However, the claim is okayed only when the Input Tax Credit claimed in GSTR-3B reconciles with the self-generating data of the read-only GSTR-2A. The Government had suspended the GSTR-2 in response to the large number of complaints it received over the compliance burden that GST forced on the taxpayers.

The Experts on Mismatch

The notices from the Tax Authorities have set the alarm bell ringing but experts believe that the situation deserves a neutral standpoint. There are many other factors that may have contributed towards the discrepancies such as:

1. Conflicting Circulars
2. Frequent Amendment to GST Laws.
3. Technical Glitches of the teething stages.
4. The technical incompetence of the Taxpayers.
5. Suspension of GSTR-2

Rajat Mohan, Partner at  AMRG & Associates, says,”Policymakers need to assure that tax officer pursue such notices in a non-coercive manner and appreciate the practical difficulties faced by taxpayers in the filing of tax returns”

However, amidst all these, the tax department has to be appreciated for its strong stand on any activities leading to tax evasions or discrepancies.

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