ICAI Representation Permitting Availment of ITC under GST for F.Y.2017-18 till 31-12-2018

Request for Permitting Availment of Input Tax Credit under GST Pertaining to Financial Year 2017-18 till 31st December 2018.

The  Institute  of  Chartered  Accountants of  India  (ICAI)  has  been   proactively supporting   the   Government  by    providing   suggestions  at   each   stages   of development, creating awareness  and  disseminating knowledge of GST among various stakeholders.

We are  writing  this  letter  considering the  practical difficulties being faced  by the trade  and  industry in availing input tax credit under  the  GST  laws.  In  term.i of provision of Section 16(4) of the CGST Act, 2017 the time limit for availing  the input tax credit by a registered person is restricted and  the said provision is reproduced below:

A  registered  person shall not be entitled  to take input  tax credit in respect of any invoice  or debit note for supply of goods  or services  or both after the due  date of furnishing of the return  under section 39 for the month of September following the end of financial year  to which  such  invoice  or invoice  relating  to such  debit note pertains or furnishing of the relevant annual return,  whichever is earlier.”

The  rationale  of  providing  a  cut-off   date   of  20th October,  2018  for  invoices pertaining to Financial Year 2017-18 was, as we  understand, more  to do with  the return filing  system   (Form  GSTR  – 1, 2 & 3). This  is because as  per  the  original system  of return filing,  there  was  a facility  of bi-lateral flow  of input credit and hence  there  was  a justified  need to restrict the  flow  of credit by the due date for September return of the succeeding financial year.

Now, since  the  entire return filing  system is  based   on  Form  GSTR  3B and   the Annual Return in Form  GSTR  9 together with reconciliation statement in Form GSTR  9C,  there  is a need to  reconsider the  due  date  for  availment of input tax credit. We humbly submit for extension of the due date for availing input tax credit due  to the  following reasons:

1) Financial Year  2017-18  is  the  first  year  of  implementation  of  GST  Law. Hence,  especially  in   the   SME   there   is  still  confusion  with   respect  to eligibility and  availment of input tax  credit.  One  of the main  objectives  of GST is to avoid  cascading impact of taxes.

2) On account of network related issues the  last  date  for  filing  of the GSTR-1 returns was   extended from   time   to  time  and   finally by  Notification  No. 72(2.017 – Central  Tax  dated 29.12.2017,  the  last date  for  GSTR-1  returns for month July  to November 2017 was  extended up  to  10.01.2018 and  for  the month of March 2018 it was  extended up  to  10″‘ May,  2018.   As a result, complete GSTR-2A  for the  period  July to March 2018 were  received by  the registered tax  payers only  in  the  month of May  – June  2018, leaving  them with   little  time  to  reconcile  the  purchases or  taking   up  the  cases  of any mistakes  or  mismatches with   their  vendors. The  dates  have   now been extended again up  to 31st October, 2018.

3) As disclosed by official statistics  at least 30-35 % of the registered tax payers who  have  filed  GSTR-3B returns have  not filed  the GSTR-1 returns. In such a situation, it is impossible for the recipient to confirm by 20″‘ October 2018, that  credit has  correctly been availed for  invoices issued   up   to  31/3/18. Further, since complete GSTR-2A became available only  in May, 2018 (with last  date  for  GSTR  1 of March 2018 being  May  2018), an  additional time needs to  be provided to  the  recipients to  take  up  cases  with  the  vendors where they have either  not uploaded the invoices or not  filed  their  GSTR 1 and  get them  to take appropriate action.

4) The  system  for filing of GSTR-6 returns has still not been  stabilized and  as per the  last Notification No. 30/2018 – Central Tax dated  30.07.2018, the last date  for  filing  of GSTR-6  return for  the  period   up  to July,  2018 has  been extend up  to 30.09.2018. Accordingly, input tax credit can only be availed  in such  cases  once  GSTR-6  is filed.   It  is still  not  certain that  date  for  filing GSTR-6 will not  be extended further as there continue to be several glitches in the  GSTN’ s system for  filing  of  the  GSTR-6  return. In case  the  date  is extended further, it will not  be possible  for ISD registrants to comply  with the  provisions of section  16(4).

5) The system for  downloading of GSTR 2A from GSTN  was provided only in July-  August 2018. There  were  technical glitches in downloading GSTR 2A through APis  and  the  system has  stabilized only  recently. The  system  for download of GSTR 6A has  also been provided only  in August 2018 and  that too only  in JSON  format.  Excel download of GSTR 6 A is still not available. The system for downloading GSTR 6A through APis  has not  been  released till  date  and  has  gone into  sandbox testing only  on  10/9/18.   Apart  from delay in making available these  facilities,  which  are  critical for carrying out any  reconciliation exercise,   there  are  issues  in  downloading voluminous files from  GSTN  which  impacts large tax payers.  One  can  understand that these delays/ glitches have  occurred on  account of  time  being   taken  by GSTN  to stabilize. But at the same  time  it needs  to be appreciated that  in the absence of timely  availability of robust facilities  for downloading GSTR 2A and  GSTR 6A, it is not possible for  the  tax payers to reconcile the  data.

6) In view  of the above  it is impossible for registered tax persons to confirm by 20.10.2018 that  credit  has  appropriately been  taken on  the  invoices  issued up  to 31.03.2018. There are several issues  hampering this like non-upload of invoices   by  vendors, upload   of  invoices   from  wrong GSTN,  mention  of wrong GSTN   of  the  buyer   etc.  Then there   are   issues   of  mismatches in capturing key data  fields at the time of booking of invoices  like date format, minor mistakes in  capturing GSTIN  or  invoice  numbers etc. which  make invoice  matching a challenging task.

7) In addition to  the  above,  GST law  also  provides for  certain restrictions on input tax  credit  as enshrined under section  17 of the  CGST  Act, 2017 and other  related  provisions. You  will   appreciate  that   calculation  of  such restrictions (more  by  applying Rule  42 & 43 of  the  CGST  Rules,  2017) in respect  of exempted supplies requires thorough examination of all inward supplies.

8) Consequence for  incorrect claim  of input tax  credit are  grave  (in  terms of [email protected]  24%) and  hence  many tax  payers are  yet  to identify and  claim correct ino• ut tax credits.

9) The due  date  of filing  Income  Tax Return and  Audit  under Income  tax as of 30th September, 2018 has  also  been extended upto 15th October, 2018 and hence effectively industry will  only  get  5 days’   time  during the  month of October to prepare the input tax credit claims  not yet made  by the tax payer and suggest  appropriate action.

10) Notwithstanding the above,  even legally, Section 16(4) of the CGST act, 2017 talks  about the  due  date  for filing of return under section  39 of the  CGST Act, 2017. Amended Rule 61(5) of the  CGST Rules,  2017 provides that Form GSTR-3B  is  not   a  return  in  lieu   of  Form   GSTR-3.  Moreover,  all   the Notifications providing for  due  dates  or extending the  said  due  dates  for filing Form GSTR-3B provides that the due date for filing of the return under section  39(1) of the CGST Act, 2017 shall be notified  separately. In the above backdrop, it is contended that  there  is, as  of today,  no  due date  for  filing return (Form  GSTR-3)  under section  39 of the  CGST  Act, 2017 and  hence, input tax credit  pertaining to Financial Year 2017-18 can  be claimed  till the date   of  filing  of  the  annual  return. This  interpretation may  also  lead  to disputes  and  aggrieved assessee  may  drag  the  matter in the  court,  which needs  to be avoided.

11) Provision  of  filing  of  statement in  FORM  GSTR-2  after viewing FORM GSTR-2A  has  been  suspended. Hence, there is no  limitation of system to permit claim  of input tax  credit for  invoices  pertaining to  Financial  Year 2017-18 till 3151  December,  2018.

12) In spite of audits under other statutory provisions like Income  Tax Act and Companies  Act  would   be   completed  by   15th October,   2018  and   30th November,  2018 respectively,  the   GST  auditor   requires   scrutiny  and investigation of  the  records   maintained by  the  taxpayer with  a  different angle  in terms of the  provisions of GST law. The  GST law has  yet  to attain stability  and  frequent notifications and  circulars are creating less clarity  and more confusion. In spite  of the completed audits the GST auditor has to look aspects like-

  1. Maintenance of books  of accounts and  records  under the GST law.
  2. There   may  be  valuation issues in  terms  of variances between book value & transaction value.  (section 15)
  3. The  concept of cross-charge has  emerged as a latest  contentious issue which the  auditors have  to determine after  having gone  through the facts  of each  case. (Columbia Asia Hospital Advance Ruling)
  4. Whether the  place  of supply provisions have  been  correctly followed by the taxpayer which will determine whether he should have charged lGST or CGST/ SGST.
  5. Whether input tax  credits   have  been  legitimately claimed,  reversed and reclaimed in terms of the  provisions of GST law.
  6. Classification issues RCM issues  both under section 9(3) and  section  9(4).
  7. Post-sale  debit   and   credit   note   issues   more   specifically  to  create difference  between the  legitimate debit  and   credit notes  issued in terms of provisions of section 34 and  financial debit and  credit notes.
  8. Reconciliations of inward/  outward supplies and  claim  of input tax credit for multi-location taxpayers may  require longer time. Furnishing details  of  exempt, nil  rated, non-taxable and  no  supply both  on inward and  outward side and  that  too with HSN  details may require longer time.
  9. Furnishing details  of  exempt, nil  rated, non-taxable and  no  supply both  on inward and  outward side and  that  too with HSN  details may require longer time.

In view of the above difficulties your goodself would appreciate that it is only at  the   time  of  preparation  of  annual return  along   with   the  reconciliation statement that the tax payer will become aware about  the  input tax credit which has   not  yet  been  claimed pertaining  to  Financial   Year  2017-18.  Hence,   we humbly request you  to  consider extending the due date for claiming the input tax  credit for invoices pertaining to Financial Year 2017-18 till  31st December,2018. The format of annual return in FORM  GSTR-9 also needs  to be suitably modified. In  doing so, the  filing  of  Annual Return in Form  GSTR  9 and  furnishing of Reconciliation Statement in Form  GSTR 9C, along  with  availment of input  tax credit will all become  coterminous. This  being the  first year  of GST returns, an extension would be most  appreciated.

The power to extend such  due  date  can be duly exercised under section  168 of the CGST Act,  2017 as already exercised in the  past  while  prescribing the  due dates  for filing  of monthly/ quarterly returns beyond the  time  limits  enshrined in the law  under section 39 of the  CGST  Act, 2017.

Hope  you  will consider our  request sympathetically, importantly considering the  practical difficulties that is being faced  by the  trade  and  industry. The SME sector  depends on the professionals to comply.  We shall be glad  to provide any further input as may be required and your office may reach us at [email protected] or 0120-3045954.

Thanking Your

Yours faithfully,

CA. Naveen N.D. Gupta

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