CBIC directs tax payers to furnish correct details of Inter State Supplies in returns: Issues Circular

CBIC Issues Clarifications On Mandatory Furnishing Of Correct Details in GSTR-3B And GSTR-1     (Circular No. 170/02/2022-GST Dtd.06/07/2022)

Dt. 09.07.2022: CBIC on 06th July has came out with various circulars where it has clarified some of the issues as directed by the GST Council in its 47th Meeting. Out of these circulars the circular No. 170/02/2022 is one of the most relevant and important circular for Tax Payers and Tax Professionals. The Circular is regarding filling of correct details in GSTR 1 and GSTR 3B with respect to the Inter State Supplies made to unregistered recipients. It has also clarified on one other issue of Input Tax Credit and reversal thereof. In this article I have tried to interpret the circular in easy language.

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

• The registered persons making inter-State supplies to unregistered persons, shall also report the details of such supplies, place of supply-wise (State Wise), in Table 3.2 of FORM GSTR-3B and Table 7B or Table 5 or Table 9/10 of FORM GSTR-1, as the case may be.
• Supply to 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 (State Wise), in Table 3.2 of FORM GSTR-3B and Table 4A or 4C or 9 of FORM GSTR-1, as the case may be, as mandated by the law.
• The registered person shall update their customer database properly with correct State name and ensure that correct Place of Supply is declared in the tax invoice and in Table 3.2 of FORM GSTR-3B while filing their return, so that tax reaches the Consumption State as per the principles of destination-based taxation system

The apportionment of IGST collected on inter-state supplies from the source to the destined State takes place based on information reported in table 3.2. The coloums are highly important for proper allocation of revenue between states. It has been come to notice that there has been default in proper mentioning of these details in GSTR 3B, which has resulted in to loss of revenue to many states. This advisory has been issued to tax payers to take proper care in mentioning these details.

2. Coming to a more significant aspect of the Circular furnishing of information regarding ITC availed, reversal thereof and ineligible ITC in Table 4 of GSTR-3B :

(Table 4 of GSTR-3B is auto-populated based on GSTR 2B)

• Reversal of ITC which are absolute and not reclaimable like under Rule 38, Rule 42, Rule 43 and as per S.17(5) to be made in Table 4(B)(1). Net ITC Available as per Table 4(C) of FORM GSTR-3B gets 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.
• Reversal of ITC which can be reclaimed later such as under Rule 37, (Reversal of input tax credit in the case of non-payment of Consideration like 180 days), Section 16(2)(b) & Section 16(2)(c) to be made in Table 4(B)(2).
• 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)
• it is also clarified by the CBIC 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 GSTR3B

Thus, as per CBIC the reduction of ITC as per GSTR-2B would be required on account of ineligible ITC or reversals to arrive at ‘Net ITC Available’ which gets credited to electronic credit ledger and reversal of ITC or any ITC which is otherwise ineligible cannot be a part of it.

    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 the correct reporting of information is to be required to be filed by the tax payers in GSTR 3B.

This advisory is seemed to have issued as it has been found that many tax payers has been considering the auto populated Input Tax Credit in the Auto Populated return as the Final Credit. They were not applying the test of availability of input tax credit based on Sec 16 & 17 of the Goods and Services Tax Act, 2017. By this advisory the Tax Payers are specifically advised that the auto populated Input Tax Credit is just based on the GSTR 1 filled by the Suppliers and it only excludes the ineligible credit U/s 16(4). Other credit reversal has to be done by the tax payers themselves considering Sec 16 and 17 of the GST act and rule 42 & 43 of GST rules. Darshit Shah, Advocate, Ahmedabad