Even after 4 years of GST implementation and more than a thousand notices and circulars, we still have a lot of problems in GST maintenance on site or in the department’s work.
Due to constant problems and changes often times, companies and professionals face a lot of problems. It is unfortunate to say that even after 4 years, we expect and hope to stabilize in the GST and also take the oath.
Just like every year, taxpayers began receiving notices from management about data mismatches in the annualized GSTR 3B or GSTR 9 return as well as in the data in GSTR 2A, which were submitted by the suppliers. Today’s article is about the best way to respond to GSTR 3B and GSTR 2A mismatch notices.
Tax authorities recover tax payments without any SCN after the searches are completed, and many complaints have been filed by experts. The investigation wing requested the Director General and Senior Commissioners to issue GST notices so that the pending cases of evasion could be completed on time.
Abhishek Rastogi, Partner at Khaitan & Co. said:
The original law did not go into effect
The idea behind the original code was that GSTR 1, GSTR 2, and GSTR 3 returns would be rendered and then matched against each other, but it was never implemented. This was not due to problems with understanding the system and the law and the section GSTR 3B was introduced. The department was expecting they would soon replace GSTR 3B with GSTR 3, a definitive return for the period, but that also hasn’t happened yet.
Section 42 of the CGST is about matching, reversal, and refunding “the ITC and describes a mechanism for matching the ITC claimed by the recipient with the input tax liability” declared by the supplier. They designed the input tax credit matching mechanism in accordance with the Goods and Services Tax (GST) Act to be accomplished through the joint filing of Forms GSTR-1, GSTR-2 and GSTR-3.
Section 42 provides a mechanism by which the supplier supplies GSTR 1 where their external supplies will be made and the same will be brought to the recipient under GSTR 2. Under GSTR 2, the options to accept, decline or modify can be exercised and then the final choice of return will be presented in GSTR Form 3.
However, the GSTR 2 and GSTR 3 models were put under suspension from the start, so there hasn’t been a match since. Legally, GSTR 2 is not replaced, but the department brought GST 2A, which is under the right to be seen by the recipient and there is no option available to correct it or add additional invoices not indicated by the supplier. However, GSTR 3 was replaced by GSTR3B, which is a summary motif.
Rule 36 (4) of the MGST Rules, 2017: Validity and Enforcement
Rule 36 (4) of the CGST Rules, 2017 introduced the matching of GSTR 2A to GSTR 3B on October 9, 2019.
As mentioned earlier, the mechanism in Section 42 read with Rule 69 for ITC matching is not effective. Section 43a mentions the credit sickness process in a specific manner (suggested by the rules). Rule 36(4) was effective as of October 9, 2019, and therefore ITC matching was not required until October 8, 2019. In addition, CIBIC issued a press release on October 18, 2018, stating that:
“The submission of external details on Form GSTR-1 by the corresponding Supplier(s) and attached for presentation on Form GSTR-2A by the Recipient is in the nature of a taxpayer’s facilitation and does not affect the ability of the taxpayer to benefit ITC on a self-assessment basis.”
Rule 36(4) came into effect as of October 9, 2019 and applies to those invoices for which credit is received after the said date. Currently, according to Rule 36(4), input tax credit can be obtained up to 105% of the GST paid on incoming supplies, details of this are uploaded by the supplier to the GSTN portal and will also be indicated on the special GSTR 2A/2B form Recipient of the said tax period.
The gist of all of the above is that Section 43A provides a procedure for availing credit in a specific manner only. The government is not authorized to impose any restrictions on the use of ITC benefits through the rules. Furthermore, “Settlements of invoices under Rule 36(4) do not apply to the period” prior to October 9, 2019. Thus, 2017-18 cannot be treated as a preview under Rule 36(4).
Principle of Impossibility and Recovery Mechanism
The council has every recovery mechanism from defaulters under sections 73, 78, 79, etc. The board can attach the bank account or property of the defaulter after the last transaction.
The receipt cannot be regulated on the supplier and the receipt cannot compel the supplier to perform “No receipt has any legal mechanism to recover the defaulted supplier”. The Board will build the defaulting party into the refund notice and immediately recover the liability for the default.
This law will not force the recipient to do the impossible, i.e. assert that the supplier has submitted the “tax to the government. It is unfair to refuse to give credit to the recipient’ when the supplier’s department fails to provide information on it within the said period.
ITC cannot be refused if there is no collusion between supplier and recipient
Within the concern, an obvious error familiar with Section 16(2)(c) may be that it imposes the burden without any reason on the recipient, who might otherwise be loyal. It makes the recipient responsible for resource executions even though the two may be unrelated.
Hence, the beneficiary was punished for the fault of the third party, the supplier, even in the absence of collusion between them. “Madurai Bench’s Madurai Bench in the case of M/s”. D.Y. Beathel Enterprises v. State Tax Officer (Data Cell) “that the method chosen by the Chief of Revenue to reflect the claimed ITC through the recipient, except for effective investigation with vendors, is not valid and required for a new investigation of this interest.
Acknowledging the facts and references mentioned, the Board will recover the default GST liability from defaulters and not through receipt, which is the other burden on the assessor.
Initially, the system was not implemented effectively and also confusion for many Acts Acts because of this, there are options that suppliers may offer for GST under B2C compliance which does not appear in the recipient’s GSTR 2A, if the board recovers it from the recipient then double tax is introduced on individual transactions.
The Board will provide facilitation of creation of electronic ledgers for a fixed period which has been implemented through the Department of Value Added Tax in Maharashtra.