Differences in input tax credit between GSTR 2A and GSTR 3B

1
Differences in input tax credit between GSTR 2A
and GSTR 3B
2

• Scrutiny notices and intimations are floating in
  the recent times where department is alleging the
  taxpayers to reverse the excess input tax credit
  claimed in Form GSTR 3B as compared to credits
  appearing in GSTR 2A. What is the validity of
  such communications? Is the taxpayer legally
  required to reverse such credits? We will discuss
  the provisions of law to understand this much
  better. Until 31st December 2021 the conditions
  to claim input tax credit were only four as per
  section 16(2) of the CGST Act, 2017 as below (a)
  The recipient is in possession of the tax invoice
  or debit note issued by the supplier (b)
  Recipient has received the goods or services or
  both (c) Supplier has paid the taxes and (d)
  Recipient has filed his returns.

3

• For the financial years 2017-18, 2018-19,
  2019-20, 2020-21 and 2021-22 till December 2021,
  the recipient was required to satisfy only these
  four conditions to avail input tax credit. Though
  Rule 36(4) of the CGST Rules 2017 was inserted
  from 9th October 2019, where the credits were
  restricted in excess of 20 of the eligible
  credits appearing in GSTR 2A which are not
  uploaded by the suppliers. This limit was further
  reduced to 10 from 01.01.2020 and then 5 from
  01.01.2021. Effective 01.01.2022 the rule was
  amended removing the option to avail the input
  tax credit in excess. The question now is whether
  Rule 36(4) is constitutionally valid? Can a Rule
  restrict the credits which the Act does not give
  power. CGST Act lays down only four conditions to
  avail input tax credits and nowhere the Act
  restricts the credits based on GSTR 2A at least
  until 31st December 2021. Further refer to the
  Hon Supreme Court Judgement in the case of Bharti
  Airtel Limited (Refer to my article ) where the
  court has clearly said that GSTR 2A is only a
  form for reference purpose and taxpayers have to
  avail the input tax credit on self-assessment
  basis. When there is no law restricting the
  availment of input tax credit, how can a Rule
  restrict it.

4

• Clause (c) of the sub section 2 of section 16 of
  the CGST Act says that input tax credit can be
  availed only if the supplier has paid his taxes.
  There is no provision in the law or in the portal
  for the recipient to check if the supplier has
  remitted the taxes correctly. We can check if the
  supplier has filed his GSTR 1 or GSTR 3B, but it
  necessarily does not confirm whether the supplier
  has or have not paid the taxes pertaining to
  recipient invoices. Can there be possibilities
  where the supplier might have paid the taxes, but
  such invoices are not appearing in recipients
  GSTR 2A. The situations can be as below 1. The
  supplier instead of filing as B2B by mistake
  filed as B2C in GSTR 1 and paid taxes in GSTR 3B.
  2. The supplier mentioned wrong GSTN of the
  recipient. 3. The supplier instead of IGST
  mentioned it as CGST and SGST or vice versa In
  the above situations though the taxes are paid by
  the supplier, it will not appear in the GSTR 2A
  of the recipient.

5

• When the systems itself has not provided for the
  recipient to verify the payment of taxes by the
  supplier, how can then they come now and question
  the validity of the claim. The system failure of
  the Government cannot be brought to the
  disadvantage of the taxpayer. When GST was
  introduced, the original provision was to bring
  in GSTR 1, GSTR 2 GSTR 3 returns, but the last
  two returns never saw the light of the day and
  the implementation date was continuously extended
  for the convenience of the policy makers and one
  day they abolished GSTR 2 GSTR 3. If these two
  returns would have been there in existence, the
  recipient would have options to check the payment
  of taxes as well as intimate the supplier if the
  invoices were not uploaded or any amendment. The
  taxpayers cannot be made scapegoat for the
  failure of the Government in implementing the
  systems as originally laid out. Circular
  183/15/2022 dated 27th December 2022 was issued
  by CBIC clarifying how to deal with the
  difference in input tax credit availed in FORM
  GSTR-3B as compared to that detailed in FORM
  GSTR-2A for FY 2017-18 and 2018-19. The circular
  says, if the difference is more than Rs.5 lakhs
  with a supplier, then a certificate from a
  Chartered Accountant or a Cost Accountant is
  required, 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. How can a Chartered Accountant or a Cost
  Accountant verify whether the supplies have
  actually been made and taxes paid? Secondly how
  can a circular be brought in without any
  authority of law? When the law does not prescribe
  any such procedure, how can circular give such
  instructions. Further the circular says if the
  difference is less than Rs. 5 Lakhs then a
  self-declaration 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. In my
  view this kind of circulars does not have any
  legal standi.

6

• In my view until 31st December 2021, if all the
  four conditions as per Section 16 sub section 2
  is met by the registered person, he is eligible
  to avail and utilize input tax credit.
  Subsequently with effect from 1st January 2022,
  they inserted clause (aa) in Section 16 sub
  section 2 of the CGST Act, which reads as
  follows The details of the invoice or debit
  note referred to clause (a) has been furnished by
  the supplier in the statement of outward supplies
  and such details have been communicated to the
  recipient of such invoice or debit note in the
  manner specified under Section 37. With the
  insertion of the above clause in the Act itself,
  they have brought in legal sanctity to the
  condition that input tax credits can be availed
  only if it is appearing in GSTR 2A. This
  amendment is effective from 1st January 2022,
  which makes it amply clear that before 1st
  January 2022, there was no provision in law to
  restrict the input tax credit based on GSTR 2A.
  It is advised to give a proper reply to all the
  communications and if the proper officer is not
  satisfied with your reply, the matter can be
  pursued further. There is always a light in the
  end of the tunnel.
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