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GSTR-3B and Availability of Input Credit - An addendum


OCTOBER 21, 2019

By Lukose Joseph, CA & Anil P Nair, CA

WE had in our article Input Tax Credit: GSTR-3, GSTR-3B and eligibility concluded/opined that

1)   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.)

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

Now, a retrospective Amendment

Vide Notification No. 49/2019 - Central Tax dated October 09, 2019, Rule 61(5) of CGST is amended retrospectively with effect from 01/07/2017 so that "the return specified in sub-section (1) of section 39 shall, in such manner and subject to such conditions as the Commissioner may, by notification, specify, be furnished in FORM GSTR-3B" a nd "where a return in FORM GSTR-3B is required to be furnished by a person referred to in sub-rule (1) then such person shall not be required to furnish the return in FORM GSTR-3."

Further sub rule 6 of Rule 61 was deleted which prescribes modification in part B of GSTR 3 based on the discrepancies, if any, between the return in GSTR 3 and GSTR 3B.

The above change vindicates our earlier stand and the amendment was the result. It is obvious that Gujarat High Court view - 2019-TIOL-1422-HC-AHM-GST has been taken into account by the CBIC and now GSTR 3B is a return filed under section 39.

A debatably pernicious feature of the amendment is that it is with retrospective effect. An Act in retrospect is valid with effect from that past date with intention to correct something done in the past.

Supreme Court on Retrospective Amendment

[Eurotex Industries and Exports Ltd and Anrvs State of Maharashtra and Anr - 2017-TIOL-218-SC-VAT ]

29. In  Rai Ramkrishna v. State of Bihar, AIR -   2002-TIOL-1578-SC-CT-CB which is a judgment of the Constitution Bench, the principle was explained in the following manner:

"The other point on which there is no dispute before us is that the legislative power conferred on the appropriate legislatures to enact law in respect of topics covered by the several entries in the three Lists can be exercised both prospectively and retrospectively. Where the legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law, but it can also provide for the retrospective operation of the said provisions. Similarly, there is no doubt that the legislative power in question includes the subsidiary or the auxiliary power to validate laws which have been found to be invalid.  If a law passed by a legislature is struck down by the Courts as being invalid for one infirmity or another, it would be competent to the appropriate legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed.  This position is created as firmly established since the decision of the Federal Court in the case of United Provinces v. Atiqa Begum. 1940 FCR 110."(emphasis added)

A lesson from Taxing History

Another controversial retrospective enactment in our country was in the famous Vodafone case.

When a deal is closed between two foreign companies in merger or acquisition of business where one company has majority shares in an Indian company, the transfer involves assets in India. The Supreme Court in much discussed Vodafone case held that Section 9 of the Income Tax Act, 1961 as at that time did not authorize the Government to tax capital gains if any derived from such an indirect transfer of shares.

As the transaction involved huge amount and thus perceived gains and possible tax involved was huge, India amended Section 9 of Income-tax Act, 1961 in Finance Act, 2012 and provided that shares or interest in any foreign company/entity shall be deemed to be situated in India if such shares or interest derives its substantial value from assets located in India. Capital gains if any from a transfer of shares or interest in foreign company deriving its substantial value from assets located in India thus became liable to tax in India.

This amendment however was made with retrospective effect from 1962.

Usually defaulters escape clutches of law on technical grounds.It is a welcome decision of lawmakers by amending the law declaring GSTR-3B as a return. It puts an end to the debate on last date of availing input credit and chargeability of penalty on delay in filing return etc.

Our addendum

Our opinion stands vindicated - being department could not deny the benefit by 'removal of difficulties' order. After the amendment of rule, however the last date of availing input tax credit for the period ended March, 2018 was October 20, 2018 which got extended up to 20th April, 2019 vide removal of difficulties order No. 2/2018-CT  dated 31/12/2018.Assessees cannot claim input tax credit thereafter.

The said amendment of lawmakes GSTR-3B a return with retrospective effect and puts to rest the debate and our opinion hereby stands corrected.

(The views expressed are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and doesn't necessarily subscribe to the same. Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)