MM TAX CLUB

Circular No.170/02/2022-GST Dated the 6^th July, 2022

Mandatory furnishing of correct and proper information of inter-State supplies and  amount  of  ineligible/blocked  Input  Tax  Credit  and  reversal  thereof  in  return  in FORMGSTR-3B and statement in FORMGSTR-1

The process of return filing has been simplified over a period of time. With effect from December 2020, FORM GSTR-3Bis getting auto-generated on the portal by way of auto-population of input tax credit (ITC)from FORM GSTR-2B(auto-generated inward supply statement)   and   auto-population   of   liabilities   from FORM   GSTR-1(Outward   supply statement),  with  an  editing  facility  to  the  registered  person. However,  it  has  been  observed that there still are some infirmities in information being furnished by the registered person in relation to inter-State supplies effected to unregistered person, registered  person paying tax under  section  10  of  the Central  Goods  and  Services  Tax  Act,  2017(composition  taxable persons)  and  UIN  holders.  Also, there  appears  to  be  lack  of  clarity regarding reporting of information about reversal of Input Tax Credit (hereinafter referred to as the “ITC”) as well as ineligible ITC in Table 4 of FORM GSTR-3B.

2.         It is desirable that correct reporting of information is done by the registered person in FORM  GSTR-3Band FORM  GSTR-1 so  as  to  ensure  correct  accountal  and accurate settlement  of  funds  between  the  Central  and  State  Governments.  Accordingly,  in  order to ensure uniformity in return filing, the Board, in exercise of its powers conferred under sub-section  (1)  of  section  168  of  the Central  Goods  and  Services  Tax  Act,  2017  (hereinafter referred to as the “CGST Act”), hereby clarifies various issues in succeeding paragraphs.

3.         Furnishing  of  information  regarding inter-State  supplies  made  to  unregistered persons, composition taxable persons and UIN holders:

It has been noticed that a number of registered persons are not reporting the correct details of inter-State supplies made to unregistered persons, to registered person paying tax under  section  10  of  the  CGST  Act  (composition  taxable  persons)  and  to  UIN  holders, as required to be declared in Table 3.2 of FORM GSTR-3B,under the notion that the taxable value of the same along with tax payable has already been reported in Table 3.1of the said FORM. In certain cases, it has also been noticed that the address of unregistered person are captured incorrectly by the supplier, especially those belonging to banking, insurance, finance, stock broking, telecom, digital payment facilitators, OTT platform services providers and E-commerce  operators,  leading  to  wrong  declaration  of  Place  of  Supply  (PoS)  in  both  the invoices issued under section 31 of the CGST Act, as well as in Table 3.2 of FORM GSTR-3B.

In  this  context,  it  may  be  noted  that  the  information  sought  in  Table  3.2 of FORM GSTR-3Bis required to be furnished, place of supply-wise, even though the details of said supplies are already part of the supplies declared in Table 3.1of the said FORM. For assisting the registered persons, Table 3.2 of FORM GSTR-3B is being auto-populated on the portal based on the details furnished by them in their FORM GSTR-1.

Accordingly, it is hereby advised that  the  registered  persons  making  inter-State supplies–

1. to the unregistered persons, shall also report the details of such supplies, place of supply-wise,in Table 3.2 of FORM GSTR-3Band Table 7B or Table 5or Table 9/10of FORM GSTR-1,as the case may be;
2. to the registered  persons paying  tax  under  section  10  of  the  SGST/CGST  Act (composition taxable persons) and to UIN holders, shall also report the details of such supplies, place of supply-wise, in Table 3.2 of FORM GSTR-3Band Table 4A or4Cor 9 of FORM GSTR-1,as the case may be, as mandated by the law.
3. shall update their customer database properly with correct State name and ensure that correct PoS is declared in the tax invoice and in Table 3.2 of FORM GSTR-3Bwhile filing their return, so that tax reaches the Consumption State as per the principles of destination-based taxation system.

It is further advised that any amendment carried out in Table 9 or Table 10 of FORM GSTR-1or any entry in Table 11 of FORM GSTR-1relating to such supplies should also be given effect to while reporting the figures in Table 3.2 of FORM GSTR-3B.

4. Furnishing of information regarding ITC availed, reversal thereof and ineligible ITC in Table 4 of GSTR-3B

Table 4(A) of the FORM GSTR-3B is getting auto-populated from various entries of FORM GSTR-2B. However, various reversals of  ITC on account of rule 42 and 43 of the CGST Rules or for any other reasons are required to be made by the registered person, on his own  ascertainment,  in Table  4(B)of  the  said FORM. It  has  been  observed  that  different practices  are  being  followed  to  report  ineligible  ITC  as  well  as  various  reversals  of  ITC  in FORM GSTR-3B.

It may be noted that the  amount of Net  ITC Available as per Table 4(C)  of FORM GSTR-3Bgets  credited into  the  electronic  credit  ledger  (ECL)of  the  registered  person. Therefore, it is important that any reversal of ITC or any ITC which is ineligible under any provision of the CGST Act should not be part of Net ITC Available in Table 4(C) and accordingly, should not get credited into the ECL of the registered person.

In  this  context,  it  is  pertinent  to  mention  that  the  facility  of  static  month-wise  auto-drafted statement in FORM GSTR-2Bfor all registered persons has been introduced from August,  2020. The  statement  provides invoice-wise  total  details  of  ITC  available  to  the registered  person including  the  details  of the  ITC  on  account  of  import  of  goods. Further, details of  the  said  statement are  auto-populated  in  Table  4  of return  in FORM GSTR-3Bwhich are editable in the hands of registered person. It may be noted that the entire set of data that is available in FORM GSTR-2B is carried to the table 4 in FORM GSTR-3B,except for the details regarding ITC that is not available to the registered person either on account of limitation of time period as delineated in sub-section (4) of section 16 of the  CGST  Act  or where  the  recipient  of  an  intra-State  supply  is located  in a  different State / UT  than that of place of supply. It is pertinent to mention that the ineligible  ITC, which was earlier not part of calculation of eligible/available ITC, is now part of calculation of eligible/available ITC in view of auto-population of Table 4(A) of FORM GTSR-3Bfrom various tables of FORM GTSR-2B. Thereafter, the registered person is required to identify ineligible ITC as well as the reversal of ITC to arrive at the Net ITC available, which is to be credited to the ECL. In light of the above, the procedure to be followed by registered person is being detailed hereunder for correct report in gof information in the return:

A.         Total ITC (eligible as well as ineligible) is being auto-populated from statement in FORM GSTR-2Bin different fields of Table 4A of FORM GSTR-3B(except for the ineligible ITC on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply).

B.         Registered person will report reversal of ITC, which are absolute in nature and are not  reclaimable,  such  as on  account  of rule  38  (reversal  of  credit  by  a  banking company or a financial institution),rule 42 (reversal on input and input services on account of supply of exempted goods or services), rule 43 (reversal on capital goods on account of supply of  exempted goods or services)of the CGST Rules and for reporting ineligible ITC under section 17(5) of the CGST Act in Table 4 (B) (1).

C.        Registered person will  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  37of  CGST  Rules(non-payment of  consideration to  supplier within 180 days), section16(2)(b)and section 16(2)(c)of the CGST Actin Table 4 (B) (2).Such ITC may be reclaimed in Table 4(A)(5)on fulfilment of necessary conditions. Further, all such reclaimed ITC shall also be shown in Table 4(D)(1).Table  4  (B)  (2) may also  be  used by  registered  person for  reversal of any ITC availed in Table 4(A)in previous tax periods because of some inadvertent mistake

D.        Therefore, the net ITC Available will be calculated in Table 4 (C) which is as per the formula (4A -[4B (1) + 4B (2)]) and same will be credited to the ECL of the registered person.

E          .As the details of ineligible ITC under section 17(5) are being provided in Table 4(B), no further details of such ineligible ITC will be required to be provided in Table 4(D)(1).

F.         ITC not available, on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act 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  registered  person  in  Table  4D(2).  Such details are available in Table 4 of FORM GSTR-2B.

4.4  Accordingly,  it  is  clarified  that  the  reversal  of  ITC  of  ineligible  credit under section 17(5) or any other provisions of the CGST Act and rules thereunder is required to be made under Table 4(B) and not under Table 4(D) of FORM GSTR-3B.

For ease of understanding, the manner of reversals is being elucidated in the illustrations enclosed as Annexure to this Circular.

5.         It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

6.         Difficulty if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.

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