Procrastination: What, why & how to overcome

                                            CA. Akshay M. Hiregange and CA. Nikita Maheshwari

After the introduction of GSTR-2B and auto population of figures in GSTR-3B, there has been greater accountability on the taxpayer to ensure that ITC has been claimed only for those invoices which are furnished by suppliers in their GSTR-1 are claimed as ITC. However, there were additional associated challenges faced by the trade, such as time gap in claiming ITC (goods in transit, goods in quality control, delays in accounting etc.) resulting in spike or reduction in claim of ITC compared to the amounts available in GSTR-2B, especially when comparison were made for individual months. Also, lack of complete clarification of disclosures to be made led to varied disclosure practices being followed across India, defeating the purpose of streamlining GST.

To streamline the disclosures in GSTR-3B across the nation, some changes in the Form have been introduced w.e.f 5th July 2022 vide NN 14/2022-CT along with clarity provided through Circular No. 170/02/2022-GST dated 6th July 2022.

Past Vs Present

Past (up to 30th June 2022) - Data such as import of goods, ISD, ITC w.r.t RCM and all other ITC is being auto-populated from GSTR 2B in GSTR 3B in relevant cells. But practically, disclosures by taxpayers are most commonly shown as - net ITC in table 4.A.5 that includes eligible ITC, ITC against RCM payments, imports, ITC reversals under rule 42, 43, 37, 38, 39. Section 17(5) credit was supposed to be disclosed in Table 4D(1) but this was not being adhered to.

Future (5th July 2022 onwards) - In the proposed amendment the main difference is that total ITC is expected to auto-populate in Table 4.A in the respective tables and various ITC reversal including those on account of Section 17(5) must be disclosed in Table 4.B to arrive at the net ITC. The auto-populated values would remain editable.

This change is mainly being brought in to identify revenue allocation between States.

Revised ITC Table 4 of GSTR 3B for quick reference.

The amendment and disclosure requirement has been clarified in the circular and have been discussed below, along with authors comments, in the below table

Table 4A – “ITC available, whether in part or in full”

Table 4B – “ITC reversed”

Table 4B(1) - As per rules 38, 42 & 43 of CGST Rules and section 17(5)

Table 4B(2) – others

Table 4C – Net ITC (4A – 4B)

Following are some checkpoints which may be ensured by the taxpayers to ensure disclosure in line with the Circular –

1. All ITC, whether eligible or ineligible, which is being reflected in current month’s GSTR-2B would be shown in Table 4.A in the respective tables.
2. Table 4A would additionally include re-claimed ITC which should match to disclosure in Table 4D(1), balance value would be the auto-populated value. Non-disclosure in table 4D(1) could lead to inquiries from the department as the value disclosed in 4A(5) would be higher than value reflecting in GSTR 2B.
3. ITC which is to be reversed and is permanent in nature i.e., which is not to be re-availed by the registered person would be disclosed in Table 4B(1). Examples have been enumerated in Table above in S no. 2. Internal tracker suggestion - Books ITC vs GSTR 2B reconciliation to now include even ineligible credits wherein nature of expense along with earlier activity performed against eligible credits.
4. ITC which is to be reversed in the current month but which can be reclaimed later is to be reversed in Table 4B(2). Examples have been enumerated in Table above in S no. 2. Internal tracker suggestion - GSTR 2B entry month, ITC claim month is suggested to be maintained.

The disclosure methodology has been completely changed, burdening the taxpayer to not only reconcile books with GSTR-2B but also keeping track of permanent and temporary reversals, with the challenge of time gap between reflection of invoices in GSTR-2B viz a viz ITC recorded (or not yet recorded) in the books. An attempt to ensure that the allocation between centre and State is done in a proper manner.

Taxpayer to be updated with all types of eligible and ineligible credits impacting their business, which can be understood through periodic trainings from a GST professional.

A suggested revision of ITC registers as per books, wherein contents may include the following – GSTIN of supplier and recipient, Capital Goods/Input/Input Services, HSN, Description of goods/service, Rate, Taxable Value, CGST/SGST/IGST/Cess, Invoice number, IRN & QR generated (Y/N), Eligible/Ineligible credit, Goods/Service Received date, Towards Exempt/Taxable/Common, Date of Payment to Vendor.

An in-depth study may be warranted on the appropriateness of ‘ITC claim/re-claim’ in GSTR 3B - The GST returns now enables entire credit to be claimed and certain credit to be reversed, and then re-claimed upon eligibility. Which provision in the law enables such procedure? Is the Rule function outside its jurisdiction? Whether this would then lead to litigation where a taxpayer re-claims the credit beyond the stipulated time period? We will have to wait and see.

Business difficulties not taken into account – Certain industries are able to identify eligibility of ITC upon consumption basis as they may be having taxable & exempt supplies. The new make the credit claim under this scenario all the more complicated.

SMEs will face reporting difficulties – Medium and small-scale industries who may not presently have robust automated internal systems for accounting and reconciliation will face issues in appropriate disclosures in GSTR 3B and are expected to attract departmental interventions.

Portal Update - It is to be noted that although the Rules have been amended, no corresponding change has been made on the portal. It would be interesting to see when the portal is updated to incorporate these changes. However, a taxpayer is required to stay alert and accommodate any last-minute incorporation done in the portal and give appropriate effects in GSTR-3B.

The views expressed are strictly personal and meant for educational purposes. We are not soliciting any work.

Any inputs / suggestions, please write to akshay@hiregange.com or nikita@hiregange.com