Even after 4 years of GST implementation and over a thousand notifications and circulars, we are still facing a lot of problems in GST on-site maintenance or in the department’s working.
Due to the issues and continuous changes many times, businesses and professionals face a lot of problems. This is unfortunate to say that even after 4 years, we are expecting and hoping for stability in the GST and also the functioning of the department.
Just like every year, taxpayers started receiving notices from the department regarding the mismatch of the data in GSTR 3B or GSTR 9 annual return as well as in data reflected in GSTR 2A, which was filed by the Suppliers. Today’s article is specific to the best way to respond to GSTR 3B and GSTR 2A mismatch notices.
Latest Update
Tax authorities are recovering tax payments without any SCN after finishing search operations, experts have filed many complaints. The investigation wing asked the director-general, chief commissioners to issue GST notices so that pending evasion cases can be finished at the given time.
“There have been a number of instances where payment is recovered from taxpayers during search and investigation, but no show cause notices are issued,” said Abhishek Rastogi, partner at Khaitan & Co.
Original Law Never Came into Force
The idea behind the original law was that GSTR 1, GSTR 2 and GSTR 3 returns would be filed and then matched with each other, but it was never implemented. It did not happen because of system and law understanding issues and the department introduced GSTR 3B. The department was expecting that they would soon replace GSTR 3B with GSTR 3, which is an eventual return of the period, but this too has not happened till now.
CGST Act’s section 42 is about matching, reversal and recovery “of ITC and prescribes a mechanism for matching of ITC claimed by the recipient with the input tax liability” declared by the supplier. They designed the mechanism for matching the input tax credit as per the GST law to be accomplished by the joint filing of Forms GSTR-1, GSTR-2 and GSTR-3.
Section 42 provides a mechanism that the supplier will furnish GSTR 1 where his outward supplies will be submitted and the same will be fetched to the recipient under GSTR 2. Under GSTR 2, options of acceptance, rejection or modification can be exercised and then the final return will be submitted in Form GSTR 3.
However, Forms GSTR 2 and GSTR 3 have been put under suspension since inception, so there has been no matching since then. Legally, GSTR 2 is not replaced, but the department has brought in GST 2A, which is under the right to be viewed by the recipient and there is no option available to rectify the same or add additional invoices which were not indicated by the supplier. However, GSTR 3 has been replaced by GSTR3B, which is a summarized form.
Rule 36(4) of MGST Rules, 2017: Validity and Implementation
Rule 36 (4) of CGST Rules, 2017 introduced the matching of GSTR 2A with GSTR 3B on October 9, 2019.
As mentioned earlier, the mechanism given under section 42 read with Rule 69 for matching of ITC is not effective. Section 43A mentions the process of the ailment of credit in a prescribed manner (suggested by rules). Rule 36 (4) was made effective from October 9, 2019, thus matching of ITC was not required until October 8, 2019. Additionally, CIBIC issued a press release on October 18, 2018, and clarified that:
“Furnishing of outward details in FORM GSTR-1 by the corresponding supplier(s) and the facility to view the same in FORM GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on a self-assessment basis”.
Rule 36 (4) came into force from 9 October 2019 and applies to those invoices on which credit is received after the said date. At present, according to Rule 36 (4), the input tax credit can be obtained up to 105% of the paid GST on inward supplies, details of the same are uploaded by the supplier on the GSTN portal and will be also indicated in the receiver’s GSTR 2A/2B form in the said taxation period.
The gist of all the above is that section 43A provides a procedure for availing credit only in a defined manner. It is not empowering the government to impose any restriction on availing of ITC benefits through rules. Further, “reconciliation of invoices under Rule 36 (4) is not applicable for the period” before October 9, 2019. Thus, 2017-18 cannot be treated as a preview under Rule 36 (4).
The Doctrine of Impossibility & Recovery Mechanism
The council has every mechanism of recovery from the defaulters beneath sections 73, 78, 79, etc. the council can attach the bank account or property of the defaulter following the last process.
The receipt cannot regulate over the supplier and receipt could not force the supplier about the execution “neither receipt has any legal mechanism of recovery of the defaulter supplier”. The council will build the party to the defaulter in the recovery notice and recover the default liability immediately.
This law will not compel the recipient to execute the impossible, that is to assure that the supplier has furnished “the tax to the government. It is unjust to deny credit to the recipient” upon the failure of the section of the supplier to file the information on that within the said period.
ITC Could Not be Refused in the Absence of Collusion Between the Supplier & Recipient
Inside the concern, there might be the usual obvious fault in section 16(2)(c) is that it forces the burden without any reason on the recipient, who may otherwise be bonafide. It makes the recipient liable for the supplier’s executions despite the two of them might be unrelated.
Hence, it penalized the recipient for the mistake of the 3rd party that is the supplier even in the absence of collusion between them. “Madras High Court’s Madurai Bench in the case of M/s. D.Y. Beathel Enterprises v. The State Tax Officer (Data Cell)” deemed that the method opted through the head of the revenue in reversing the ITC claimed through the recipient, excluding effectively investigating the sellers, is not right and ordered for the new inquiry this concern.
Final Words:
Acknowledging the mentioned facts and references, the council will recover the default GST liability from the defaulters and not through receipt, which is the other burden to the assessee.
In the beginning, the system was not effectively executed and also confusion for several laws of acts because of that there are choices that the suppliers may file the GST beneath B2C compliance from which it is not appearing in GSTR 2A of the recipient, if the council recovers it from the recipient then double tax on the single transactions shall be furnished.
The council will make available the facilitation of the generation of electronic crest ledgers for a specific time that was executed through the Maharashtra VAT administration.
