Handle Notices for ITC Mismatch in GSTR-2A and GSTR-3B for FY 2017-18 and 18-19

Introduction

In the complex taxation landscape, businesses often navigate the intricacies of notices issued by the GST Authority. These formal notices from GST authorities require proper attention and strategic handling to address concerns related to discrepancies, mismatches in various forms and returns filed, or any other non-compliance with the law.

Recognizing the need for clear guidelines and consistent communication, the GST authorities periodically release circulars to provide essential clarifications. These circulars serve as beacons of understanding, offering insights and directives on how businesses should navigate the intricacies of responding to official notices.

One such circular, No. 183/15/2022-GST, was issued on 27^th December 2022 to provide clarification on how to deal with notices related to mismatch in ITC in FORM GSTR-3B as compared to FORM GSTR-2A for FY 2017-18 and FY 2018-19.

Since the scrutiny/audit/investigation for the said years has increased and has been growing so far, the need to understand this circular has become vital for businesses before providing a reply to such notices.

This blog will delve into the explanations, clarifications, and simple understanding of what this circular states and how the business will be able to deal with such notices.

Let’s overview the scenarios that can cause a mismatch in GSTR-2A and GSTR-3B.

Scenarios for Mismatch resulting in the issuance of Notice.

• When the supplier failed to file GSTR-1 for the said tax period but filed GSTR-3B, which resulted in the non-reflection of supplies in GSTR-2A of the recipient for the said tax period.

• When the supplier filed GSTR-1 and GSTR-3B but failed to report a particular transaction in GSTR-1, which resulted in the non-reflection of that transaction in GSTR-2A of the recipient for the said tax period.

• When the supplier has issued an invoice as per Rule 46 of CGST Rules, 2017 for the supplies made to a registered person, but the said transaction was reported as a B2C transaction instead of a B2B transaction in GSRT-1, which resulted in the non-reflection of said transaction in GSTR-2A of the recipient for the said tax period.

• When the supplier has filed both GSTR-1 and GSTR-3B, but the incorrect GSTN of the recipient has been reported in GSTR-1, which resulted in the non-reflection of that transaction in GSTR-2A of the recipient for the said tax period.

Now that we know the scenarios that can be responsible for the mismatch in GSTR-2A and GSTR-3B, we shall understand the clarification given by the GST council to tackle such notices.

The GST Authority may look into compliance with Section 16 of the CGST Act, 2017, regarding fulfillment of the conditions for the availment of ITC. Let’s have a look at the conditions.

Section 16- Conditions for availment of ITC.

1. That he is in possession of a tax invoice or debit note issued by the supplier or such other tax-paying documents.
2. that he has received the goods or services or both
3. that he has paid the amount towards the value of supply, along with tax payable thereon, to the supplier.
4. he has furnished the return under section 39.

ITC can be availed on fulfillment of the above conditions, irrespective of the fact that the transaction was not reflected in GSTR-2A of the recipient. The following requirements must be fulfilled to prove the 3rd condition, i.e., the supplier has discharged his tax liability towards the value of ITC availed.

• When the difference in ITC claimed in GSTR-3B compared to GSTR-2A is more than 5 lakh rupees.

The registered person has to produce a certificate for the concerned supplier from CA (Chartered Accountant) or CMA (Cost Accountant) to the proper officer, certifying that supplies in respect of invoices not reflected in GSTR-2A have been made to the recipient and the tax has been paid by the supplier in his return in GSTR-3B.

Certificates issued by CA or CMA shall contain UDIN. UDIN of the certificate issued by CAs can be verified from the ICAI website, and that issued by CMAs can be verified from the ICMAI website.  

• When the difference in ITC claimed in GSTR-3B compared to GSTR-2A is up to 5 lakh rupees.

The registered person, also known as the claimant, has to produce a certificate from the supplier to the proper officer that supplies in respect of invoices not reflected in GSTR-2A have been made to the recipient and the tax has been paid by the supplier in his return in GSTR-3B.

Other points to be considered for claiming mismatched ITC.

• Section 16(4) specifies the time limit within which ITC must be claimed in GSTR-3B, and after that, ITC cannot be claimed. But as per Order No. 02/2018 – CT dated 31.12.2018, Input tax credit for financial year 2017-18 can be claimed till the due date of furnishing of the return for the month of March 2019.
• This clarification is for the bonafide or genuine errors committed in reporting during the said years, and the guidelines are clarificatory. They may be applied as per the facts of the cases.  It will not be considered an interpretation of the law or overriding the law.
• This clarification and instructions are for ongoing scrutiny/audit/investigation proceedings for FY 2017-18 or 2018-19 and not for the completed proceedings. However, these instructions will apply in those cases for FY 2017-18 and 2018-19, where any adjudication or appeal proceedings are still pending.

Conclusion

In conclusion, addressing the notice of mismatch between the GST returns in Form GSTR-2A and GSTR-3B is imperative for maintaining compliance and fostering a transparent business environment. Timely clarifications by the government for disparities and rectification of such disparities/mismatches by businesses are crucial to avoid potential complications with tax authorities. This process ensures accuracy in tax reporting and demonstrates a commitment to adherence to regulatory requirements.

Businesses must proactively resolve discrepancies, foster a culture of compliance, and reinforce their commitment to ethical and lawful business practices. By taking swift action to rectify the differences, companies can contribute to a smooth and efficient GST ecosystem, safeguarding their financial standing and maintaining the trust of stakeholders.

Komal Vithalani

Content Writer

Komal Vithalani, a Chartered Accountant and Commerce graduate, is a dedicated professional committed to delivering value with years of expertise in navigating the complexities of indirect tax laws. Her practical excellence includes managing perplexed litigations, dispensing tactical tax advice, conducting thorough compliance checks, supervising audits, and crafting articulate and insightful content. At Cygnet, Komal seamlessly blends her profound understanding of tax regulations with cutting-edge tax technology. Leveraging her competence, she adeptly transforms complex tax tech jargon into concise, impactful, and engaging content. This not only aids readers in comprehending tax-related topics with enlightening clarity but also ensures the delivery of narratives that resonate broadly.