GST WEEKLY UPDATE : 35/2022-23 (28.11.2022) By CA Vipul Khandhar

Reading Time: 7 minutes

-By CA Vipul Khandhar

Mandatory furnishing of correct and proper information of ineligible Input Tax Credit and reversal thereof in Form GSTR-3B As Per CBIC circular no. 170/02/2022:-

GST has highlighted incorrect reporting of ineligible Input Tax Credit by Taxpayers.

Maharashtra & Kerala state has issued instruction, Detail instruction issued by the Kerala state as under:

• The Kerala GST Department vide Trade Circular No.1/2022 dated November 21, 2022has issued instructions on mandatory furnishing of correct and proper information of ineligible / blocked Input Tax Credit (“ITC”) and reversal thereof in return in FORM GSTR-3B, with reference to the Notification No. 14/2022-Central Tax dated July 05, 2022 of the CBIC, Dept. of Revenue, Ministry of Finance and corresponding notification of the State in  R.O No. 871/2022 dated September 13, 2022 of the Taxes (B) Dept., Govt. of Kerala, Circular No. 170/02/2022 dated July 06, 2022 of the CBIC, Dept. of Revenue, Ministry of Finance and Trade Circular No. 01/2021 dated January 30, 2021 of the Commissioner of State Tax, Thiruvananthapuram.

• The process of filing returns under the GST has been substantially changed over a period of time. One of the significant changes is the method for declaration of input tax credit (ITC) in the return in Form GSTR 3B. After the 43rd GST Council Meeting, the procedure for declaring the input tax credit in the return in Form GSTR 3B has been amended, and the same was notified in the notification referred 1st above. The GST Policy Wing of the Central Board of Indirect Taxes and Customs (CBIC) had already issued a clarification in the matter, vide the circular referred to above.

• The input tax credit on the inward taxable supplies of goods or services or both to a registered person is not eligible under certain circumstances provided under Section 17(1), 17(2), 17(4) and 17(5) of the Central GST and Kerala State GST Act, 2017 read with Rules 38, 42 and 43 of the Central GST and Kerala GST Rules, 2017 (refer to the Central GST Act and Kerala State GST Act, 2017 for detailed provisions)

• After the recent amendments, Table 4(A)of FORM GSTR 3B pertaining to the particulars of the input tax credit available get auto populated from the auto drafted input tax credit statement in FORM GSTR 2B. The utilization of input tax credit towards output tax dues in Table 6 of FORM GSTR 3B also get auto populated from the available balance in the electronic credit ledger and also from the Table 4(C) – “Net ITC available” of the FORM GSTR 3B of the respective tax period.

• Instances have been noticed where the taxpayers are deducting the amount of ineligible input tax credit directly by editing the total amount of input tax credit auto populated in Table 4(A)of FORM GSTR 3B. This will result in incorrect settlement of funds to the State. Also, in some cases the taxpayers are not declaring the “ineligible” input tax credits, under Table 4(B) of FORM GSTR 3B resulting in wrong utilization of ineligible credit. Such taxpayer shall be liable to reverse/pay such input tax credit along with interest @ 18% per annum from the date of utilization till the date of reversal/repayment and shall also be penalized.

• Accordingly, in order to ensure uniformity in return filing the Commissioner of State Tax, in exercise of the powers conferred by section 168 of the Kerala State Goods and Services Tax Act, 2017 hereby clarifies the issues detailed hereunder:

• The procedure to be followed for furnishing of information regarding input tax credit availed, reversal thereof and ineligible input tax credit in Table 4 of FORM GSTR-3B

• Total ITC (eligibleas well as ineligible) of the taxpayer will be auto-populated from statement in FORM GSTR 2B in different fields of Table 4A of FORM GSTR 3B (except for the ineligible input tax credit on account of limitation of time period as specified in section 16 (4) of the CGST and KSGST Act, 2017 or where the recipient of an intra-State supply is located in a different State than that of place of supply).

• The taxpayer shall not deduct the amount of ineligible input tax credit directly by editing the total amount of input tax credit auto populated in Table 4A ofFORM GSTR 3B. If the taxpayer has to declare any amount of ineligible input tax credit under any of the provision, they should strictly adhere to the ensuing instructions in this regards.

• Out of the amounts available in Table 4A of FORM GSTR 3B, if the taxpayer have any ineligible input tax credit which is to be reversed on account of Rule 38(reversal of credit by a banking company or a financial institution) or Rule 42 (reversal of credit on inputs and input services if the same is used for non business purpose or used for the outward supply of exempted goods or services) or Rule 43 (reversal of credit on capital goods if the same is used for non business purpose or used for the outward supply of exempted goods or services) of the CGST and KGST Rules, 2017, as the case may be, the same shall be declared in Table 4 (B) (1) of FORM GSTR 3B. In addition to that, if the taxpayer has any input tax credit which is blocked as per Section 17(5) of the CGST and KSGST Act, 2017 the same shall also be declared in Table 4 (B) (1) of FORM GSTR 3B.

• The taxpayer shall report reversal of ITC which are not permanent in nature and can be reclaimed in future subject to fulfilment of specific conditions, such as on account of Rule 37(non-payment of consideration to supplier within 180 days) of CGST and KGST Rules, 2017, Section 16(2)(b) (non receipt of goods or services or both in the same tax period in which the invoice has been received) and Section 16(2)(c) (non payment of tax by the supplier) of the CGST and KSGST Act, 2017 in Table 4 (B) (2) of FORM GSTR 3B. Such input tax credit may be reclaimed in the appropriate table in Table 4 (A) of FORM GSTR 3B on fulfilment of necessary conditions. Further, all such reclaimed input tax credit shall also be shown in Table 4 (D) (1) of FORM GSTR 3B. Table 4 (B) (2) of FORM GSTR 3B may also be used by the taxpayer for reversal of any input tax credit availed in Table 4(A) of FORM GSTR 3B wrongly in any previous tax periods due to any inadvertent/clerical mistakes.

• Accordingly, the “Net ITC Available” in Table 4 (C) ofFORM GSTR 3B will be as per the formula (4A – [4B (1) + 4B (2)]) and the same will be credited to the electronic credit ledger of the taxpayer and also in Table 6 of FORM GSTR 3B to set-off the output tax dues, if any.

• Input tax credit not available, on account of limitation of time period as specified in Section 16 (4)of the CGST and KSGST Act, 2017 or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply, may be reported by the taxpayer in Table 4 D (2) of FORM GSTR 3B. Such details are available in Table 4 of FORM GSTR-2B.

• If any taxpayer has availed ineligible or blocked credits and in cases where the time limit prescribed under Section 39(9)of the Act for rectification by filing FORM GSTR 3B is over, they may reverse such input tax credit on his own ascertainment by filing FORM GST DRC-03, electronically on the common portal, in accordance with prevailing Acts and Rules, to avoid further litigations and proceedings such as Show Cause Notices demanding tax, interest, imposition of penalty etc.

2. DGFT: Relaxation for submission of hard copies of applications under the ‘Transport and Marketing Assistance for Specified Agriculture Products Scheme:

The DGFT has issued Trade Notice No. 21/2022-23 dated November 25, 2022 regarding the one-time relaxation for submission of hard copy of applications for claiming assistance under the erstwhile ‘Transport and Marketing Assistance (“TMA”) for Specified Agriculture Products’ Scheme for the exports made w.e.f. March 01, 2019 has been foreclosed w.e.f. March 31, 2021 extended up till 31.12.2022.

3. Govt. to empower the CCI to handle anti-profiteering cases u/s 171(2) of the CGST Act w.e.f. Dec 01, 2022:

The CBIC vide Notification No. 23/2022-Central Tax and Notification No. 24/2022- Central Tax both dated November 23, 2022 has empowered the Competition Commission of India (“CCI”) established under the Competition Act, 2002 as an authority under Section 171(2) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) with effect from December 1, 2022 to examine whether the Input Tax Credit (“ITC”) availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

4. AAR & Important Decisions:

(i) Orissa Highcourt Decision Regarding Cancel dealer has been allowed to overdue GST taxes and file pending GST returns before GST registration was cancelled under Section 29(2)(c) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”)

(Applicant – M/s. Durga Raman Patnaik)

The Court held that the appropriate officer to give a chance to the Petitioner to take all necessary steps to revive registration and to be allowed to pay overdue GST taxes and file pending GST returns before GST registration was cancelled under Section 29(2)(c) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

The Petitioner GST registration was cancelled in accordance with Section 29(2)(c) of the CGST Act since no returns had been filed for six months in a row. Instead of requesting revocation of cancellation of registration under Section 30 before the appropriate authorities, the Petitioner preferred an appeal under Section 107 of the CGST Act. This appeal was rejected due to law of limitations because it was submitted with around delay of 660 days.

The Petitioner filed a Writ Petition (Certiorari) with the Orissa High Court to protest this denial.

The Petitioner claimed that the appellate authority might have given him the chance to pay the tax, interest, penalty, and late fee and prevented him from approaching the Registering Authority under Section 30 by tolerating the delay, as this Court has previously done in numerous cases.

The Petitioner stated that amongst one of his defenses that, ‘the provisions of the GST enactments cannot be interpreted so as to deny the right to carry on Trade and Commerce to a citizen. The constitutional guarantee is unconditional and unequivocal and must be enforced regardless of the defect in the scheme of the GST enactments. The right to carry on trade or profession also cannot be curtailed. Only reasonable restrictions can be imposed. To deny such rights would militate against the rights under Article 14, read with Article 19(1)(g) and Article 21 of the Constitution of India.’

The Court, therefore, held that the Petitioner is allowed to file returns for the period prior to the cancellation of registration, if such returns have not already been filed, together with tax defaulted which has not been paid prior to cancellation, along with interest for such belated payment of tax and statutory payments and fee fixed for belated filing of returns for the defaulted period under the provisions of the GST Act, within a period of sixty (60) days from the date of receipt of the notice of cancellation of registration.

(ii) AAR On GST applicable on cost of diesel incurred for running DG Set in Course of Providing DG Rental Service:

(Applicant – Tara Genset Engineers Regd)

Determination of the liability to pay tax on cost of diesel incurred for running DG Set in the course of providing DG rental service under CGST Act 2017 and Uttarakhand GST Act,2017. GST @ 18 % is applicable on the cost of the diesel incurred for running DG Set in the Course of Providing DG Rental Service as per Section 15 of the Central Goods and Services Tax Act, 2017 / Uttarakhand Goods and Service Tax Act, 2017.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.