JULY 27, 2021

By P G James

AS per the georank.org data, India with a GDP of .7T is ranked as the seventh largest economy in the world compared with Kazakhstan which is ranked as 55th with GDP of 9.3B. But the interesting fact is that since the beginning of 2019, all VAT payers in Kazakhstan are required to issue Invoices only electronically.

Even our Govt admitted the ground level reality that misuse of the beneficial provision of Input Tax Credit(ITC) under GST regime is the most common modus of tax evasion. In order to curb the menace of fake Invoicing, which is much easier, than making fake currencies, for the miscreants, e-Invoicing is widely used and mandated by Governments across the globe.

As per the Press Release dated 13th July 2021 of CBIC, during the financial year 2020-21 the CGST Zones and the Directorate General of GST Intelligence (DGGI) have booked about 8000 cases involving fake ITC of over Rs. 35000 crores.  During the financial year, 426 persons including 14 professionals such as CAs, Lawyers and masterminds, beneficiaries, directors etc were arrested.  

Even though Not 68/2019-Central Tax dated 13th Dec 2019 has been issued inserting sub-rule (3) to Rule 48 of CGST Rules, 2017 for the issuance of electronic Invoice with Invoice Reference Number (IRN) generated through Common Goods and Services Tax Electronic Portal, it was implemented in a phased manner with effect from 1st Oct, 2020 covering tax payers having turnover of Rs 500 crs and above. The threshold limit was subsequently reduced to Rs 100 crs effective from 1st Jan, 2021 and further to Rs 50 crs with effect from 1st April, 2021.

The number of taxpayers who generated e-Invoice as on 15th July 2021 is only 1.34 lacs barring exempted categories like Banks, Insurance, Goods Transport Agencies etc, out of the total registrants of 1.29 crs, making the percentage which is hardly 1%.

There is no stricter enforcement of the e-Invoice provisions and even many Govt Departments were not issuing e-Invoice right from the beginning. Vide Notn No 23/2021-Central Tax dated 1st June, 2021, "government department or local authority" was also included in the exemption list of those who are not required to issue e-Invoice.

There are entities still continuing the practice of issuing normal Invoice without switching over to e-Invoice with IRN generated from the Invoice Registration Portal either due to lack of awareness, wrong interpretation of the exemption provisions or hesitation to configure and update their systems. Recipients of such Invoices who claim ITC thereof are also appearing to have not adopting stringent adherence on this.

As per Rule 48(4) of CGST Rules, notified class of registered persons (whose aggregate turnover in any preceding financial year from 2017-18 onwards, is more than prescribed limit) have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).

As per Rule 48(5), any invoice issued by a notified person in any manner other than the manner specified in Rule 48(4), the same shall not be treated as an Invoice.

As per Sec 2(66) of CGST Act, 2017, "Invoice" or "Tax Invoice" means the tax Invoice referred to in section 31, which states that a registered person supplying taxable goods or services shall issue Tax Invoice containing such particulars, as may be prescribed. Invoicing formalities, contents, manner etc. are prescribed in Rules 46 to 48 of CGST Rules.

Sec 16(2) of CGST Act mandates that "Tax Invoice" should be in possession of the registered person to claim Input Tax Credit and if the Invoice is not the one as specified in Sec 31 read with Rule 46, the entitlement to ITC is disputable in view of the embargo contained in sub-rule 5 of Rule 48.

Further, in the answer to Question No 29 of the FAQ issued by the Goods and Services Tax Network, it has been clarified that "it is for the concerned taxpayer (both Buyers and Suppliers) to confirm fulfilment or otherwise of conditions as per notification/rules".

Issuance of incorrect Invoice or Invoice issued in violation of the provisions of CGST Act or Rules made thereunder or takes/utilises Input Tax Credit in contravention of the provisions of the Act/Rules under sub clauses (i), (ii) & (vii) of Sec 122 (1) is a punishable offence.

Sec 122 (1) states that -

"Where a taxable person who--

(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder"

Hon High Court of Mumbai in JCB India Ltd vs UOI - 2018-TIOL-2766-HC-MUM-GST ruled that it is fallacious argument that Input Tax Credit under GST is unconditional or without any restrictions and thus the conditional Input Tax Credit can strictly be availed within four corners of Statute. Hon High Court also held in the cases of Valia Associates vs State of Maharashtra & Ors - 2019-TIOL-1250-HC-MUM-VAT and Mahalaxmi Cotton & Ginning Pressing & Oil Industries vs. State of Maharashtra & Ors - 2012-TIOL-370-HC-MUM-VAT that claim towards ITC is not a matter of right but a concession.

It is the usual practice followed by authorities to deny the credit at the recipient's end owing to the deficient or invalid Invoice even if the fault is committed by the supplier. It is highly imperative to exercise abundant caution in accepting normal tax Invoice issued in lieu of electronic Invoice; the status of E-Invoice enablement of a taxpayer can be tracked manually or automated in Invoice processing after checking the status in the e-Invoice portal - (https://einvoice1.gst.gov.in/Others/EinvEnabled)

The following maxim is to be borne in mind:

"Vigilantibus et non dormientibus jura subviniunt"

(The law aids the vigilant, not those who slumber on their rights )

[The views expressed are strictly personal.]