GST Compliance Alert: Taxpayers, Beware of Two Critical Dates viz. 15th & 20th October 20

CBIC -the Apex Body of Indirect Tax Administration in India has recently issued two very significant Notifications, mandating crucial GST Compliances viz.

(i) Blocking of E-Way Bill (EWB) Generation Facility for Taxpayers with AATO over Rs 5 Cr., after 15th October 2020 (Compliance Deadline: 15.10.2020)

(ii) Clarification relating to the application of sub-rule (4) of rule 36 of the CGST Rules, 2017 for the months of February 2020 to August 2020 (Compliance Deadline: 20.10.2020 concerning Filing of GSTR 3B Return for September 2020)

Now, we shall be discussing and analyzing the above two important CBIC Notifications, in detail, as under:

(I) Blocking of E-Way Bill (EWB) Generation Facility for Taxpayers with AATO over Rs 5 Cr., after 15th October 2020.

 In terms of Rule 138 E (b) of the CGST Rules, 2017, the E-Way Bill generation facility of a person is liable to be restricted, in case the person fails to file their GSTR-3B returns, for a consecutive period of two months or more.

The GST Council in its last meeting has decided that this provision will be made applicable for the taxpayers whose Aggregate Annual Turn Over (AATO, PAN-based) is more than Rs 5 Crores.

Thus, if the GSTIN associated with the respective PAN (with AATO over Rs 5 Cr.) has failed to file their GSTR-3B Return for two or more tax periods, up to the month of tax period of August 2020, their EWB generation facility will be blocked on the EWB portal.

Compliance Alert: The EWB generation facility for such GSTINs (whether as consignor or consignee or by transporter) who have failed to file their GSTR 3B Returns for two or more tax periods, up-to-the month of August 2020, will be blocked on EWB Portal after the 15th October 2020. To avail continuous EWB generation facility on EWB Portal, the taxpayers are therefore advised to file their pending GSTR 3B returns immediately, on or before 15.10.2020.

Exceptions: The above Instruction is not applicable to:

1. Unregistered Dealers on the EWB portal or;
2. Those taxpayers who have already filed their GSTR-3B Return for August 2020 or;
3. Those taxpayers whose AATO (PAN-based) is below Rs 5 Cr.

(II) Clarification relating to the application of sub-rule (4) of rule 36 of the CGST Rules, 2017 for the months of February 2020 to August 2020 (Compliance Deadline: 20.10.2020 concerning Filing of GSTR 3B Return for September 2020)

Sub-rule (4) to rule 36 of the CGST Rules, 2017, has been inserted vide notification No. 49/2019- Central Tax, dated 09.10.2019. The said sub-rule provides for restriction in availment of input tax credit (ITC) in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37 of the CGST Act, 2017.

Sub-rule (4) of rule 36 prescribes that the ITC to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub- section (1) of section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub- section (1) of section 37. The said threshold limit of 20% for eligible ITC has been further reduced to 10% w.e.f. 1.1.2020.

In view of the corona pandemic, the above-stated ITC restriction as per Rule 36(4) has been suspended between February 2020 to August 2020 and accordingly the taxpayers were allowed to avail full ITC on provisional basis without any restriction. However, above relief was with rider that the restriction under Rule 36(4) should be applied by taxpayers cumulatively for the months viz Feb to August, 2020 in its GSTR-3B for the month of September,2020.

Keeping the situation prevailing in view of measures taken to contain the spread of COVID-19 pandemic, vide notification No. 30/2020-CT, dated 03.04.2020, it had been prescribed that the condition made under sub-rule (4) of rule 36 of the CGST Rules shall apply cumulatively for the tax period February, March, April, May, June, July and August, 2020 and that the return in FORM GSTR-3B for the tax period September, 2020, shall be furnished with the cumulative adjustment of input tax credit for the said months.

CBIC has recently issued  Circular No. F.No. CBIC/20/06/14/2020-GST dated 09.10.2020, for providing clarification concerning the application of rule 36(4) of the CGST Rules, 2017 for the months of February to August 2020.

Accordingly, all the taxpayers have been advised to ascertain the details of invoices uploaded by their suppliers under section 37(1) of the CGST Act, for the periods of February, March, April, May, June, July and August, 2020, till the due date of furnishing of the statement in FORM GSTR-1 for the month of September, 2020 i.e. 11.10.2020, as reflected in GSTR-2As.

Taxpayers shall reconcile the ITC availed in their FORM GSTR-3Bs for the period February, 2020 to August, 2020 with the details of invoices uploaded by their suppliers of the said months, till the due date of furnishing FORM GSTR-1 for the month of September, 2020.

The cumulative amount of ITC availed for the said months in FORM GSTR-3B should not exceed 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under section 37(1) of the CGST Act, till the due date of furnishing of the statements in FORM GSTR-1 for the month of September, 2020.

It may be noted that availability of 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37 of the CGST Act does not mean that the total credit can exceed the tax amount as reflected in the total invoices for the supplies received by the taxpayer i.e. the maximum credit available in terms of provisions of section 16 of the CGST Act.

The excess ITC availed arising out of reconciliation during this period, if any, shall be required to be reversed in Table 4(B)(2) of FORM GSTR-3B, for the month of September, 2020.

The due date of filing GSTR-3B for the month of September, 2020 is 20.10.2020 for taxpayers having turnover in excess of Rs. 5 crores, (22nd or 24th October, for small taxpayers).

Failure to reverse such excess availed ITC on account of cumulative application of sub-rule (4) of rule 36 of the CGST Rules would be treated as availment of ineligible ITC during the month of September, 2020.

The manner of cumulative reconciliation for the said months in terms of proviso to sub- rule (4) of rule 36 of the CGST Rules is explained by way of illustration, in a tabulated form, below.

Table I

Deadline for Availing ITC for FY 2019-20

Further, by virtue of section 16(4) of the CGST Act, 2017, the ITC in respect of any invoice issued in FY 2019-20, or any corresponding debit note, can’t be availed after the due date of furnishing of Return u/s 39 (presently GSTR 3B), for September 2020, or furnishing of Annual Return for FY 2019-20, whichever is earlier.

The due date of filing GSTR-3B for the month of September, 2020 is 20.10.2020 for taxpayers having turnover in excess of Rs. 5 crores, (22nd or 24th October, for small taxpayers). This due date of 20.10.2020 is earlier than the due date of filing Annual Return for FY 2019-20. It is pertinent to mention here that in view of corona pandemic, the due date of filing of Annual Return for the FY 2018-19 has been extended till 31.10.2020, so in the present pandemic conditions, the due date of filing Annual Return for the FY 2019-20, in any case will fall after 31.10.2020.

Therefore, the ITC of the FY 2019-20, which has still not been claimed by the taxpayers in their monthly/quarterly GST Returns, can be claimed by them in the GSTR-3B of September, 2020 only and the due date of filing of the said GSTR-3B Return for the month of September is 20.10.2020, for the taxpayers having their turnover in excess of Rs 5 crores.

Compliance Alert: The taxpayers having annual turnover of more than Rs 5 crores, should file their GSTR-3B for the month of September, 2020, by 20.10.2020 (22nd or 24th October, for small taxpayers), and avail the left-out ITC for the FY 2019-20, in the said Return and should also reverse the excess ITC availed by them for the months of February 2020 to August 2020, in terms of Rule 36(4) of the CGST Rules, 2017, as discussed above, in the said GSTR 3B Return for September, 2020.

Thus, the taxpayers should take note and care of these two critical dates viz. 15.10.2020 and 20.10.2020, in respect of the above discussed crucial and significant GST compliances, in order to full compliance w.r.t GST Laws, without attracting any penal consequences.