Even after four years of GST implementation and over a thousand notifications and circulars, we continue to encounter several issues with GST on-site maintenance and department operations. Businesses and professionals encounter several challenges as a result of issues and constant change. It is terrible that even after four years; we are still expecting and hoping for stability in the GST and the department’s operation. Taxpayers began getting letters from the department, as they do every year, addressing data mismatches in GSTR 3B or GSTR 9 annual returns, as well as data represented in GSTR 2A, which was filed by Suppliers.
Abstract
The Department has already begun sending notifications for the disparity between the submitted GSTR 3B or GSTR 9 annual return and the Input indicated in the Suppliers’ GSTR 2A. We have recently passed four years of the GST on July 1st, 2021, and we are still experiencing a number of challenges with the GST, either on the site or in the department. Since the commencement of the GST, the GST Council has issued over 1000 Notifications and Circulars. Regrettably, many times the rules of business and professionals become victims of the constant changes. Even after four years of the GST, we expect and hope for the stability of the GST laws.
Non- Implementation of the Original Law
The original law intended for GSTR 1, GSTR 2, and GSTR 3 returns to be filed and then matched, however, this was never executed. It did not occur due to system and legal comprehension concerns, and the department instead introduced GSTR 3B. The department anticipated that they would shortly replace GSTR 3B with GSTR 3, resulting in the eventual reintroduction of the period, although this has yet to occur.
Section 42 of the CGST Act, 2017 addresses matching, reversal, and recovery “of ITC and establishes a procedure for matching of ITC claimed by the receiver with the input tax due” recorded by the supplier. They created the system for matching the GST input tax credit through the combined submission of Forms GSTR-1, GSTR-2, and GSTR-3.
Section 42 establishes a process through which the supplier will submit GSTR 1 for his outbound supply, which will then be retrieved by the recipient under GSTR 2. Acceptance, rejection, or amendment choices are available in GSTR 2, and the final return is filed in Form GSTR 3.
However, Forms GSTR 2 and GSTR 3 have been suspended since their establishment; therefore no matching has occurred since then. Legally, GSTR 2 is not replaced, but the department has introduced GST 2A, which the receiver has the right to access and there is no ability to fix the same or add new invoices that were not specified by the supplier. GSTR 3 has been superseded by GSTR3B, which is a simplified version.
Rule 36(4) of the MGST Rules, 2017: Validity and Implementation
On October 9, 2019, Rule 36 (4) of the CGST Rules, 2017 mandated the matching of GSTR 2A and GSTR 3B.
As previously stated, the procedure provided under section 42 read with Rule 69 for matching of ITC is ineffective. Section 43A refers to the procedure of credit sickness in a regulated manner (suggested by rules). Because Rule 36 (4) became effective on October 9, 2019, ITC matching was not necessary until October 8, 2019. Furthermore, on October 18, 2018, CIBIC published a press statement clarifying that:
“The furnishing of outward information in FORM GSTR-1 by the appropriate supplier(s) and the recipient’s ability to view the same in FORM GSTR-2A is in the nature of taxpayer facilitation and has no influence on the taxpayer’s capacity to avail ITC on a self-assessment basis.”
Rule 36 (4) becomes effective on October 9, 2019, and applies to invoices for which credit is received after that date. Currently, pursuant to Rule 36 (4), an input tax credit of up to 105% of the paid GST on inward supplies can be claimed; details of the same are posted by the supplier on the GSTN Portal and will also be shown in the receiver’s GSTR 2A/2B form during the taxation period.
The gist of all of this is that Section 43A establishes a mechanism for obtaining credit only in a certain manner. It does not provide the government the authority to put any restrictions on the use of ITC advantages through rules. Furthermore, prior to October 9, 2019, “reconciliation of bills under Rule 36 (4) is not applicable.” As a result, 2017-18 cannot be considered a preview under Rule 36 (4).
The Impossibility Doctrine and the Recovery Mechanism
The GST Council has every recovery procedure from defaulters under sections 73, 78, 79, and so on. Following the last phase, the council may attach the defaulter’s bank account or property.
The receipt cannot control the supplier and cannot compel the supplier to carry out the execution since “neither receipt has any legal procedure for recovering the defaulter supplier.” The council will assign the party to the defaulter in the recovery notification and swiftly collect the default responsibility.
This law will not oblige the recipient to do the unthinkable, namely to ensure that the provider has provided “the tax to the government.” It is unreasonable to refuse credit to the receiver” because the supplier’s section failed to file the information within the specified time frame.
In the absence of collusion between the supplier and the recipient, ITC could not be refused
Within the issue, the usual evident flaw in section 16(2) (c) is that it imposes the responsibility without justification on the receiver, who may otherwise be genuine. It holds the recipient accountable for the supplier’s action, even though the two are unconnected.
As a result, even in the absence of conspiracy between them, it punished the recipient for the mistake of the third party, the provider.
The “Madras High Court’s Madurai Bench” ruled in the case of M/s. D.Y. Bethel Enterprises v. The State Tax Officer (Data Cell)” that the method chosen by the head of revenue in reversing the ITC claimed by the recipient, excluding effectively investigating the sellers, is not correct and ordered a new investigation into this matter.
FAQs
What is a notice of mismatch between GSTR 3B and GSTR 2A?
A notice of mismatch between GSTR 3B and GSTR 2A is issued by the Goods and Services Tax (GST) department when there is a discrepancy or inconsistency observed between the tax liability declared in GSTR 3B (monthly summary return) and the details of inward supplies reflected in GSTR 2A (auto-populated purchase register).
Why is it important to respond to notices of mismatch?
It is important to respond to notices of mismatch promptly because failure to reconcile and address the discrepancies may lead to further scrutiny, penalties, or adverse actions by the GST department. Responding accurately and timely helps in resolving the issue and maintaining compliance with GST regulations.
Is there a deadline for responding to notices of mismatch?
Yes, the GST department typically provides a deadline for responding to notices of mismatch. It is important to adhere to the deadline to avoid penalties or further actions by the authorities. If additional time is needed, you may request an extension from the GST department.
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