Basis to take ITC - GSTR 2A or GSTR 2B?
FEBRUARY 26, 2021
By Padmasri Manyam, Senior Associate, Lakshmikumaran & Sridharan, Bengaluru
ONE of the difficulties the taxpayers are facing today is reconciling the amount of ITC as per Form GSTR-2A with the amount of ITC taken in Form GSTR-3B. The Government has introduced yet another Form called Form GSTR-2B vide Notification No. 82/2020-Central Tax dated 10.11.2020, with effect from 01.01.2021. The implementation of Form GSTR-2B has increased the chaos among the taxpayers/Industry.
An attempt is made in this Article to discuss the recent changes made under Rule 36(4) and to highlight the nuances revolving around taking the ITC based on Form GSTR-2A or Form GSTR-2B.
A. Changes under Rule 36(4)?
- As per Rule 36(4) of the Central Goods and Service Tax (CGST) Rules, 2017, Input tax credit (ITC) availed in respect of invoice or debit note, the details of which have not been furnished 1 by the supplier shall not exceed 105% 2 of the eligible ITC available in respect of invoices or debit notes which are furnished by the supplier under Section 37(1) of the CGST Act, 2017.
- The details furnished by the supplier in his Form GSTR-1 or furnished using Invoice Furnishing Facility (IFF) by the quarterly return filers (QRMP Scheme), are made available to the recipient of supply under Form GSTR-2A in the GST common portal. With effect from 01st January 2021, the Government has notified Form GSTR-2B in addition to the Form GSTR-2A.
- Both, Form GSTR-2A and Form GSTR-2B contain details of inward supplies and ITC as available for the recipient (outward supplies furnished by the supplier). The question which arises now is what is the basis to compute 105% of the eligible ITC in terms of Rule 36(4) of the CGST Rules. But, before examining said question, let us first understand the difference between Form GSTR-2A and Form GSTR-2B.
B. Difference between Form GSTR-2A and Form GSTR-2B:
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Form GSTR-2A
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Form GSTR-2B
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- The details of inward supplies will be reflected on real-time basis as and when the supplier furnishes the outward supply details in his Form GSTR-1 or using IFF.
Eg: 1) in case where the supplier furnishes his Form GSTR-1 for the month of July 2020 in the month of January 2021 (delay in filing of the return), such details will be reflected in Form GSTR-2A of July 2020 for the recipient.
2) In case where the supplier filed GSTR-1 of July 2020 before the due date, however, he declares certain missed-out supplies of July 2020 in Form GSTR-1 of January 2021, such details will be reflected in Form GSTR-2A of January 2021 for the recipient.
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- The details of inward supplies will be reflected based on the details of outward supplies furnished by the supplier between two due dates of Form GSTR-1 or between two due dates of IFF.
Eg: 1) Form GSTR-2B for the month of December 2020 contains the details uploaded by the supplier between 11th December 2020 till 11th January 2021.
2) In case where the supplier furnishes Form GSTR-1 for the month of December 2020 after 11th January 2021, the details will not be reflected in Form GSTR-2B of December 2020. Such details will be reflected only in Form GSTR-2B of the subsequent months.
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- Form GSTR-2A is dynamic statement i.e. The details of inward supplies or the amount of ITC for any given tax period will change based on the date of generating Form GSTR-2A.
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- Form GSTR-2B is Static statement i.e. The details of inward supplies or the amount of ITC for any given tax period will be constant, if Form GSTR-2B is generated after the due date of Form GSTR-1 or IFF for such tax period.
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- There is no break-up of the amount of eligible and ineligible ITC under Form GSTR-2A.
- The recipient has to ascertain the eligible and ineligible ITC at invoice level.
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- There is a break-up of eligible and ineligible ITC summary under Form GSTR-2B, basis the Place of supply, blocked credits under Section 17(5) of the CGST Act.
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- In case where all the suppliers are tax compliant and furnish the outward supply details without fail on or before the due date, ITC as per Form GSTR-2A and ITC as per Form GSTR-2B would, ideally, be the same. However, for various reasons, the supplier may not be able to upload the returns on or before the due date which brings us back to the open question.
C. The open question is what is the basis to take ITC in terms of Rule 36(4)?
- With effect from 01.01.2021, the details uploaded by the supplier has been made available in both Form GSTR-2A as well as in Form GSTR-2B of the recipient. The Government has not yet clarified what is the basis to compute 105% of the eligible ITC in terms of Rule 36(4) of the CGST Rules.
- As per 42nd Council meeting recommendations dated 05.10.2020, as part of the enhancement in features of return filing, the GST council has decided the 'Auto-population of input tax credit from suppliers' GSTR-1s through the newly developed facility in FORM GSTR-2B for monthly filers w.e.f. 01.01.2021 and for quarterly filers w.e.f. 01.04.2021'.
- Also, as per GSTN update dated 15.12.2020, the amount of ITC as per Form GSTR-2B is auto populated in Form GSTR-3B and the Taxpayers have an option to edit and modify the amount of ITC auto-populated in Form GSTR-3B at present.
Conclusion:
Form GSTR-2B is static statement and the amount of ITC for a tax period will be frozen after the due date of Form GSTR-1 or IFF for the respective tax period, whereas, Form GSTR-2A is dynamic and the amount of ITC keeps changing as and when the supplier uploads the details. Hence, it may be advisable for the recipient to take ITC, basis the Form GSTR-2B so that the amount of ITC will not change subsequent to the filing of returns.
The system is also auto-populating ITC as per Form GSTR-2B in Form GSTR-3B. Thus, it can be inferred that the Government's intention also is to consider the eligible ITC as per Form GSTR-2B for the purpose of Rule 36(4). Nevertheless, in order to avoid any confusion among the taxpayers or to avoid future disputes, the clarification from the Government in this regard is crucial.
[The views expressed are strictly personal.]
1The term 'uploaded' appearing in the rule substituted with the term 'furnished', w.e.f. 01.01.2021
2Provisional credit reduced from 10% to 5%, w.e.f. 01.01.2021
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