SEPTEMBER 09, 2019

By Lukose Joseph, CA & Anil P Nair, CA

QUESTION: I have not filed any return for the financial year 2017-18 for GST due to reasons beyond my control. I now have a notice from the department to file the same. My issue is whether I can avail input tax credit for that year, else my business will be closed and my liability on account of GST could be more than my total net assets.

What does the Act say?

Subsection 4 of Section 16 of CGST Act is very clear that availing of credit shall be earliest of filing of return under section 39 for the month of September following the end of financial year or filing of Annual Return whichever is earlier.

What does Order say?

However CBIC, vide removal of difficulties order No. 2/2018-CT dated 31/12/2018 added proviso to above subsection by which time limit of availing such credits has been extended from due date of furnishing return under section 39 for the month of September 2018 till the due date of furnishing return under section 39 for the month of March 2019 with the condition that supplier has uploaded the details under section 37(1). (That is 20th April 2019). Earlier press release dated 18th October 2018 issued to clarify that the last date for availing input tax credit relating to the invoices issued during the period from July 2017 to March 2018 is the last date for the filing of return in Form GSTR-3B.

Though it appears to give some favor for taxpayer by extending time for availing credit on inputs, in reality it had the effect of preventing the taxpayer from taking the credit on the ground of filing of Form 3B belatedly and just wrongly interpreting GSTR-3B as a return.

Interpretation of the word: Return

Whether GSTR-3B is a Return in lieu of GSTR 3?

The CGST rule 61(5) was amended as follows so as to declare GSTR-3B in lieu of GSTR-3 -

'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'.

Even though the rule was made to make Form GSTR-3B in lieu of GSTR-3, lawmakers themselves understood the fault and amended to make it mandatory to file GSTR-3.

Hence subsequently sub rule (5) was substituted by sub rule (5) and (6) as follows:

(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 the manner and conditions subject to which the] return shall be furnished in GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

(6) Where a return in FORM GSTR-3B has been furnished, after the due date for furnishing of details in FORM GSTR-2 –

a) Part A of the return in FORM GSTR-3 shall be electronically generated on the basis of information furnished through FORM GSTR-1, FORM GSTR-2 and based on other liabilities of preceding tax periods and Part B of the said return shall be electronically generated on the basis of the return in FORM GSTR-3B furnished in respect of the tax period;

b) the registered person shall modify Part B of the return in FORM GSTR-3 based on the discrepancies, if any, between the return in FORM GSTR-3B and the return in FORM GSTR-3 and discharge his tax and other liabilities, if any;

c) Where the amount of input tax credit in FORM GSTR-3 exceeds the amount of input tax credit in terms of FORM GSTR-3B; the additional amount shall be credited to the electronic credit ledger of the registered person.

From the above, it transpires that rule 61(6)(b) once again reiterates to file Form GSTR-3, as the monthly return.

What Court said?

The matter regarding availing input tax credit came up before Gujarat High Court in AAP and Company, CA's v Union of India. 2019-TIOL-1422-HC-AHM-GST

It was argued that as per Section 16(4) the last date for taking input tax credit should be due date of filing of return in Form GSTR -3 or Annual Return, whichever is earlier. The pertinent question was whether Form GSTR-3B is a return that is required to be filed under Section 39 of the CGST Act/GGST Act.

Considering technical glitches in GSTN, the Returns GSTR-2 and GSTR-3 were kept in abeyance and GSTR-3B was introduced as a stopgap arrangement. Notification No 17/2017-CT on 27.07.2017 omitted the reference to return in Form GSTR-3B being a return in lieu of Form No GSTR -3.

High Court upheld that, GST Press Release dated 18th October 2018 clarifying that the last date for availing ITC, in relation to invoices or debit notes relating to such invoices and issued by the corresponding supplier(s) during the period from July 2017 to March 2018 is the last date for the filing of GSTR -3B return for the month of September, 2018 i.e. 20th October 2018 is contrary to Section 16 (4) of the CGST Act/GGST Act read with Section 39 (1) of the CGST Act/GGST Act read with Rule 61 of the CGST Rules/GGST Rules; paragraph 3 of the Press Release, is illegal to the extent of its clarification.

Replying to Query

It appears from above that (in our opinion) the last date of availing input tax credit for the period ended March, 2018 is as of now November 30, 2019, the last date of filing of annual return for the period 01/07/2017 to 31/03/2018 being the taxpayer was not provided with facility to file monthly return namely GSTR-3 which is a grave fault of tax administrators! (However CBIC has a contrary view that same is 20th April, 2019 vide removal of difficulties order No.2/2018-CT dated 31/12/2018 we referred in the beginning.)

Let us see a few more interesting matters related to this -

Errors in GSTR-3B

A vital doubt arises in our mind is whether one can rectify GSTR-3B to rectify the errors including errors in input tax credit.

The lawmakers came out with hundreds of amendments, could not stabilize the law, and miserably failed to provide facility to taxpayers to comply with procedures. Many of the provisions are leaving behind lot of scope for interpretation or misinterpretation. We strongly believe that, this good and simple tax should allow revision, when for example even the income tax law allows for revision.

The Good News:

The Honorable High Court of Andhra Pradesh has issued an Interim Order on August 14, 2019 in the case of Panduranga Stone Crushers [WP 8662 of 2019] to the extent that the petitioner, who made inadvertent errors in GSTR-3B relating to IGST credit, is permitted to rectify GSTR-3B statements for certain months manually and the GST authorities shall process the same in accordance with the procedure established by law.

We strongly believe that the court order is reasonable and enables the taxpayer to rectify errors including input tax credit in GSTR-3B and suitable amendment should be made in law to enable assessee to rectify errors in returns and GSTR-3B.

Strong Precedents:

In the erstwhile Central Excise and Service Tax regime, there were a number of cases where Courts decided that the assessee shall be eligible for input tax credit if his output is taxable whether he filed a return or not.

In Chamundi Steel Re-rolling Mills v CCE 1996 (81) ELT 563 and many cases it was pointed out that an Assessee may not have complied with Cenvat procedures for a long time assuming his product to be exempt from duty. In such cases, while it is not possible for him to comply procedures for past years, Cenvat credit has to be allowed for past period, irrespective of whether Cenvat credit was claimed in the past. Followed in CCE v Chemplast Sanmar (2009) 239 ELT 398 (Madras HC DB).

We started a good and simple tax, but the matter has come to such a pass that the Act and its rules can be amended as many times as possible by the Government, but a Return once filed by the taxpayer can never be amended!

The conclusions/suggestions are -

- GSTR-3B is not a Return and non-filing of the same will not preclude due input tax credit.

- Revision of returns, esp. GSTR-3B should be allowed to facilitate genuine rectifications.

- If output is taxable, input tax credit should be allowed despite technical lapses and we need a statutory provision to back this well settled view by judiciary.

There is no way denying natural justice to the assessees by strictly enforcing procedures. The Authorities should limit the punishment to penalties!

(The views expressed are strictly personal.)