AAR West Bengal: Reversal of excess ITC claimed by applicant

AAR West Bengal: Reversal of excess ITC claimed by applicant

Reetu | Oct 27, 2021 |

AAR West Bengal: Reversal of excess ITC claimed by applicant

AAR West Bengal: Reversal of excess ITC claimed by applicant

Introduction: An advanced ruling is a mechanism whereby taxpayers can get answers or clarifications regarding supply of goods and services, directly from tax authorities and the primary objectives for such a mechanism are to reduce litigation, attract FDI due to transparent tax liability, provide certainty with respect to tax liability and disclose ruling in an inexpensive and transparent manner. The Authority for Advanced Ruling (AAR) constituted by the tax authorities interprets tax laws for the taxpayers and it was created to address any issues faced by taxpayers and assist them by providing a decision on the clarification sought. The AAR’s appalled authority is the AAAR (Appellate Authority or National Appellate Authority for Advanced Ruling). Section 95 to Section 106 in Chapter XVII of CGST Act covers the procedures and rules related to advance rulings. An application is made by the taxpayer on the clarification sought by them. The taxpayer is provided an opportunity of being heard by the AAR. If there is consensus on resolution on the clarification sought between the AAR and taxpayer, an ‘Advance Ruling’ is issued by the AAR and on the contrary, the matter is referred to the AAAR.

Facts of the application made to AAR, by taxpayer ‘Eastern Coalfields Limited – (applicant)’, dated 11-May-2021:

The applicant had received services from M/S Gayatri Projects Ltd. during the month of January 2020 – March 2020, acknowledged vide invoice numbers 43-45 and payments cleared by applicant for the services received by them. The applicant had made payments for the GST payable on the service received by them. The applicant had further claimed ITC on the supplies made to them without the supplier filing Form GSTR 1 and GSTR 3B for the supplies made.

Form GSTR 1 is the monthly form generated by the suppliers of goods and services on the consolidated outward supplies made by them. In case of delayed submission of Form GSTR 1, Form GSRT 3B is submitted to notify the authorities on the delayed monthly payments/return which should have been filed prior. In this case, the supplier M/S Gayatri Projects Ltd. had not furnished Form GSTR 1 on the outward supplies made by them to the applicant before the due dates for the financial year ending March 2020, but had made a delayed filing of the monthly return through Form GSTR 3B in the month of November 2020, for all the 3 months supplies made by them to the applicant from January 2020 – March 2020. Without the acknowledgement of monthly returns of the outward supplies made by the supplier, the applicant had claimed ITC on the good received by them.

Since the supplier M/S Gayatri Projects Ltd. had filed delayed monthly returns for the supplies made by them during January 2020 to March 2020 in the month of November 2020, the issue reflected in Form GSTR 2B of the applicant which is an auto form that is generated in the portal for the registered persons on invoices where ITC can/cannot be claimed due to several reconciliation reasons. Form GSTR 2B highlighted that since ‘Return filed post Annual cut-off’ as the supplier had filed Form GSTR 1 and GSTR 3B for the invoices pertaining to Jan 2020 – Mar 2020 only in November 2020, the applicant cannot claim ITC on the 3 invoices pertaining to Jan 2020 – March 2020, on which applicant had already claimed ITC.

Form GSTR 2B (Auto drafted ITC statement) was a new feature added to the GST portal to be effective from 01-Jan-2021. The notification introducing the new feature can be accessed through the following link.

‘https://www.cbic.gov.in/resources/htdocs-cbec/gst/notfctn-82-central-tax-english-2020.pdf (cbic.gov.in)’

The applicant required the AAR to clarify on the below points regarding the ITC claimed by them for the supplies received from M/S.Gayatri Projects Ltd.

  • Whether the applicant is entitled to receive ITC on the supplies made to them by M/S.Gayatri Projects Ltd.
  • Whether the applicant has to reverse the ITC claimed by them even though they have met all the filing requirements, remitted the tax on-time to the government and also fulfilled every condition stipulated under Section 16 of the CGST Act.

Contention of the applicant and details presented to AAR by applicant:

The issue that the applicant had claimed ITC on invoices on which supplier made delayed payment of tax to government was brought about by the auto-draft ITC statement, Form GSTR 2B, which was effective only from 01-Jan-2021. But due to trial runs launched for the new feature, the said issue emerged. Since the applicant had followed all the conditions eligible to claim ITC on invoices from M/S.Gayatri Projects Ltd., the authorized representative of the applicant presented that the applicant is eligible to claim ITC on the 3 invoices of the supplier and they need not reverse the same basis the GSTR 2B report which was yet to be effective.

Contention of the revenue:

The concerned officer from the department confirmed the facts of the case listed above that the applicant had availed ITC on invoices pertaining to Jan 2020-Mar 2020 on which the supplier had remitted tax in the month of November 2020, which is after the cut-off date of September 2020 for availing ITC as per Section 16(4) of the CGST Act.

Observations and final ruling by AAR vide Order No. 07/WBAAR/2021-22 dated 09.Aug.2021:

The AAR denied ITC claim by applicant on the following three grounds:

1. Section 16(1) of the CGST Act provides for entitlement of ITC for every registered person but Section 16(2), Section 16(3) and Section 16(4) are restrictive provision on availing ITC by registered persons which base the ITC claim to be valid only when remittances are made to the government within the cut-off time and necessary returns are filed in a timely manner within the cut-off limit, which is September 2020 in this case, by both the supplier of goods and services and recipient.

2. Further as per amended Rule 36(4) dated 26.Dec.2019 vide notification no. 75/2019, the registered taxable person cannot claim more than 10% of the eligible ITC for which supplier has not uploaded the invoices or debit notes. Further attention is drawn by the AAR to para 3 of Circular No. 123/42/2019 dated 11.Nov.2019 where the CBDT has clarified that in respect of Rule 36(4), it is the responsibility of the taxpayer that ITC is availed in terms of said rule on self-assessment basis. The notification also states that the balance ITC which the taxpayer or in this case the applicant is eligible for, can be claimed by the taxpayer in the succeeding months basis proper documentary evidence being furnished. Since in this case, the supplier has not uploaded the invoices until November 2020 which is after the cut-off date and neither the applicant had availed only 10% of ITC as per Rule 36(4), the AAR is of the contention that the applicant has violated Rule 36(4) w.r.t claiming ITC.

3. The AAR acknowledged the fact that Form GSTR 2B based on which the issue has risen would come into effect only from 01.Jan.2021. But they are of the view that Section 41 and Section 36(4) were already in force which clearly state that claiming ITC has to be on self-assessment basis. Circular No. 142/12/2020-GST dated 09.Oct.2020 was also cited where it is stated that in case of delayed upload of invoice by supplier, a consolidate reconciliation up to the month of September 2020 has to be made and any excess claim of ITC has to be reversed.

Taking into the view the above three points, the West Bengal AAR has ruled that the ITC availed by the applicant on the 3 invoices of M/S. Gayatri Projects Ltd have to be reversed and the applicant is not eligible to avail ITC as the supplier had filed delayed Form GSTR-1 and GSTR-3B in the month of November 2020, which is after the cut-off eligible period for availing ITC on invoices pertaining to the previous financial year.

To Read the Official Order Download PDF Given Below : 

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