The CBIC has asked tax officers to verify details of invoices to resolve mismatches in ITC claims which have come up during the GST audit for 2017-18 and 2018-19.
A large incidence of mismatch in Input tax credit (ITC) claims and details of outwards supplies has come to light during the GST audit for 2017-18 and 2018-19 undertaken by tax officials, following which show cause notices were issued to taxpayers.
The Central Board of Indirect Taxes and Customs (CBIC) in a circular said it has received various representations from the trade as well as the tax authorities, seeking clarification regarding the manner of dealing with such discrepancies between the amount of ITC availed by the registered persons in their Form GSTR-3B and the amount as available in their Form GSTR-2A during 2017-18 and 2018-19.
GST authorities, for the first time, are undertaking audit of the new tax regime which was rolled out on July 1, 2017.
The CBIC said in order to ensure uniformity in the implementation of the provisions of the law across the field formations, tax officer would first seek the details from the registered person regarding all the invoices on which ITC has been availed in Form GSTR 3B but which are not reflecting in his Form GSTR 2A.
The tax officer shall then ascertain fulfilment of three conditions in respect of the ITC availed on such invoices by the said registered person.
The conditions are that the business who has claimed ITC is in possession of a tax invoice or debit note issued by the supplier or such other tax paying documents; that he has received the goods or services or both; and that he has made payment for the amount towards the value of supply, along with tax payable thereon, to the supplier.
Following the verification of documents, if it is found that the difference between the ITC claimed in GSTR-3B and that available in GSTR 2A of the registered person in respect of a supplier for the said financial year exceeds Rs 5 lakh, then the business would be required to furnish a certificate from a Chartered Accountant (CA) or the Cost Accountant (CMA).
In cases where the mismatch is less than Rs 5 lakh, the registered business would be required to produce a certificate from the supplier that the said supplies have actually been made by him.
"These instructions will apply only to the ongoing proceedings in scrutiny/audit/ investigation, etc. for FY 2017-18 and 2018-19 and not to the completed proceedings. However, these instructions will apply in those cases for FY 2017-18 and 2018-19 where any adjudication or appeal proceedings are still pending," the CBIC said.
KPMG in India, Partner Indirect Tax, Abhishek Jain, said matching of input tax credit has been an issue under GST especially during the early days. This clarification issued by the Government is much appreciated as the same aims to resolve ITC related differences in GSTR3B and GSTR2A for FY 2017-18, and 18-19.
"For invoices not appearing in GSTR 2A, jurisdictional officers have been empowered to physically verify invoices to allow/ disallow credit in accordance with GST law, which while opens up a resolution channel, also introduces requirement for robust liasioning," Jain said.