JULY 20, 2019

By Anshul Jain, Advocate, SRA Consulere Advocates

IN the matter of AAP & Co. V/s Union of India SCA No. 18962 of 2018 - 2019-TIOL-1422-HC-AHM-GST a Writ Petition was filed before the Hon'ble High Court of Gujarat against the contents of Para 3 of GST Press Release dated 18.10.2018. The said Para is reproduced below for ready reference:

"3. With taxpayers self-assessing and availing ITC through return in FORM GSTR-3B, the last date for availing ITC in relation to the said invoices issued by the corresponding supplier(s) during the period from July, 2017 to March, 2018 is the last date for the filing of such return for the month of September, 2018 i.e. 20th October, 2018."

The Petitioner contended that Section 16(4) of the CGST Act, 2017 provides that the last date for taking the Input Tax Credit ('ITC') in respect of any invoice or debit note pertaining to a Financial Year is the due date of furnishing of the return under Section 39 of the CGST Act, 2017 for the month of September following the end of the Financial Year or furnishing of the relevant Annual Return, whichever is earlier. Further, the Petitioner submitted that the bare perusal of Rule 61 of the CGST Rules, 2017 would indicate that the return prescribed in terms of Section 39 is a return required to be furnished in Form GSTR-3 and not in Form GSTR-3B.

Rule 61(5) of the CGST Rules, 2017 as was existing prior to its amendment i.e. before 27.07.2017 is reproduced below for ease of reference:

(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38 has been extended and the circumstances so warrant, return in FORM GSTR-3B, in lieu of FORM GSTR-3, may be furnished in such manner and subject to such conditions as may be notified by the Commissioner.

Vide Notification No. 17/2017-C.T. dated 27.07.2017, the said Rule was substituted w.e.f. 01.07.2017 and the substituted Rule is also reproduced below for ready reference:

"(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38 has been extended and the circumstances so warrant, the Commissioner may, by notification, specify that return shall be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

The Hon'ble Gujarat High Court, vide Para 31 of its Judgement, categorically observed that:

"31. It would also be apposite to point out that the Notification No.10/2017 Central Tax dated 28th June 2017 which introduced mandatory filing of the return in Form GSTR-3B stated that it is a return in lieu of Form GSTR-3. However, the Government, on realising its mistake that the return in Form GSTR-3B is not intended to be in lieu of Form GSTR-3, rectified its mistake retrospectively vide Notification No.17/2017 Central Tax dated 27th July 2017 and omitted the reference to return in Form GSTR-3B being return in lieu of Form GSTR-3."

In view of the above observation, the Hon'ble High Court held that that Form GSTR 3B is not in lieu of Form GSTR-3. It is merely a stop-gap arrangement till the GST system glitches were resolved for introduction of Form GSTR-3 and hence, Form GSTR 3B is not a return in terms of Section 39 (1) of the CGST Act. Consequently, it has been held that, the contents of Para 3 of the Press Release dated 18.10.2018 which restricted the availment of ITC for the period 2017-18 only till the last date of filing of Form GSTR-3B for the month of September 2018 (i.e. 20th October, 2018, later extended to 25th October, 2018) is not legal.

IMPLICATIONS OF THE ABOVE JUDGMENT

This is a welcome decision as it clears the confusion with respect to availment of ITC of the invoices pertaining to the Financial Year 2017-18. While, the High Court has only addressed the validity of Para 3 of the Press Release dated 18.10.2018, the decision has wide implications including the ones mentioned below:

1. Availment of ITC for F.Y. 2017-18:

In terms of Section 16(4) of the CGST Act, a registered person can avail the ITC of the invoices pertaining to F.Y. 2017-18 till the due date of filing return under Section 39 for the month of September, 2018 (which was extended till March, 2019) or due date of furnishing the Annual Return for the F.Y. 2017-18, whichever is earlier.

Since, the Hon'ble High Court has held that GSTR-3B is not a return under Section 39, the registered person can claim ITC of invoices pertaining to F.Y. 2017-18 till the due date of furnishing of the Annual Return for F.Y. 2017-18 i.e., 31.08.2019 (extended vide Order No. 06/2019 dated 28.06.2019). But it is to be noted that filing of return by the supplier under Section 39 is also a condition for availing ITC.

2. Rectification of GSTR-1 filed for the F.Y. 2017-18

Section 37 of the CGST Act provides that no rectification of error or omission shall be allowed in Form GSTR-1 after the due date of filing of return under Section 39 for the month of September following the end of Financial Year to which such GSTR-1 pertains or after the due date of filing of the Annual Return, whichever is earlier.

On the basis of the judgment of Hon'ble Gujarat High Court, a registered person can amend Form GSTR-1 pertaining to F.Y. 2017-18.

2. Validity of notices issued under Section 46 and Assessment under Section 62

Section 46 of the CGST Act empowers the proper officer to issue notice to the registered person who has failed to file return under Section 39. There are various incidents where the registered person has failed to file GSTR-3B and the officers have issued notice under Section 46 the CGST Act. In case, the person to whom the notice is issued under Section 46 of the CGST Act fails to act upon it, the proper Officer has the power to make the assessment of tax liability of such person under Section 62 of the CGST Act.

After the judgment of Hon'ble Gujarat High Court, the validity of such notices and assessment will be under question.

4. Validity of Levy of Late Fee

Late fee has been collected from the registered person who have delayed in filing of GSTR-3B. But, Section 47 of the CGST Act and corresponding State Act provides that late fees shall be payable where a registered person has delayed in filing return under Section 37 or Section 38 or Section 39 or Section 45 of the CGST Act. Thus, the late fee collected towards delay in filing GSTR-3B will be under challenge.

5. Self-Assessment

Section 59 of the CGST Act provides that every registered person shall self-assess the taxes payable and furnish the return under Section 39 of the CGST Act. The decision of the Hon'ble High Court raises a concern as to whether the assessment done and furnished under GSTR-3B should be considered as self-assessment or not.

The above mentioned are the apparent implications of the judgment of Hon'ble Gujarat High Court. There will be other far reaching implications which will be seen in the time coming forward.

(The views expressed are strictly personal)