Genuine & Bonafide Taxpayers not to be benefited by the recent CBIC circular for mismatch of GSTR-3B & GSTR-2A
The CBIC has issued a welcome clarification to deal with the difference in ITC availed in GSTR-3B by the recipient of the supply vis-a-vis the missing details of the said supply in GSTR-2A as filed by the supplier for initial periods.
However, though it’s a welcome clarification, it will still lead to litigation and act as a deterrent for the bonafide taxpayers who have not claimed the ITC as the same was not legally permissible. These were the genuine and most honest class of the law compliant who will still not be benefited by the new circular issued recently by the CBIC.
One may note that the entire clarification, even its preamble, suggests that the recipient has availed the ITC despite the same being not forming the Part of GSTR-2A I.e. not or incorrectly reported by the supplier.
There are genuine classes of the taxpayers who in compliance to the requirement envisaged u/s 16 has already chosen not to avail the ITC because of non-appearance of the same in GSTR-2A? There may be instances whereby taxpayers might have agreed with their suppliers for reimbursement of the GST portion or otherwise only if the same reflects in GSTR-2A, in such cases, the recipient might not have claimed the ITC and had even compensated by his supplier. Not keeping such cases in the purview of the recent clarification by CBIC may further augment the litigation & disputes in coming time.
One may note that the above understanding also emanates from the new rule 37A which contemplates a case where the recipient has reversed the ITC with or without interest in case the underlying supply is missing from GSTR-2A. Further, the new rule also provides for re-availment of ITC once the supplier makes good the deficiency. To put it slightly in a different perspective, the new rule encourages the recipient to avail ITC even if the same is not appearing in GSTR-2A so that upon reversal of the same, the recipient will be eligible to re-avail in future.
The fact remains, a recipient who has acted in a bonafide way and in a mode to comply with the law in words and spirit & did not avail the ITC for the reason that it is not there in GSTR-2A will be adversely affected. In my view, if the tax is paid by the supplier, the same cannot be disallowed in the hands of the recipient for technical reasons. The whole purpose of these recent circular convey this understanding of the law maker. However, the implementation of this circular keeping in mind its intended purpose shall also be an important milestone to avoid unnecessary litigation.
Another issue could also be there. Where due to a change in tax structure, the ITC even if allowed now to the taxpayer, could not be of any use or that the taxpayer would have sought refund had he have availed the ITC then. This may depend upon the facts of the case and to be dealt accordingly. It would have been much better if the circular issued could have addressed this issue as well.
The copy of the above referred Circular No. 182 by CBIC is attached herewith.