The core issue is that Circular No. 170/02/22 dated 06.07.2022 was issued with an objective as follows: "It is desirable that correct reporting of information be done by the registered person in FORM GSTR-3B and FORM GSTR-1 so as to ensure correct accountal and accurate settlement of funds between the Central and State Governments."
Now, the SGST Department across the country is issuing notices with the following:
ITC reversal on the basis of the following computation
- Table 8(D) of GSTR 9 is required to be reported in GSTR-3B in Table 4D(2) for disclosures of ineligible ITC.
- In some states, the requirement is to reclaim the amounts as above in GSTR-3B Table 4B(5), reverse in GSTR-3B Table 4B(1), and then report the ITC in GSTR-3B Table 4D(2).
This brings us to the Pointers:
1. In case in earlier periods, i.e., prior to July 2022, when Circular No. 170/02/22 was issued, disclosures under GSTR-3B Table 4D(1) under the ineligible category have not been made, then it is a non-compliance. A contention of the taxpayers may be that clear directions like Circular 170 were missing earlier.
2. From the tax period in JULY 2022, i.e., after Circular 170 was effective, the above plea may not suffice, especially after notification of the requirements of the circular in around November 2022.
3. To reclaim and reverse old ITC, it would create an issue of time barring under Section 16(4) of the CGST Act, 2017, for the reclamations. However, reversals would be an admission. It is important to note here that while SGST Departments may require such a disclosure, the CGST Anti-evasion units may see a non-compliance with Section 16(4) of the CGST Act, 2017. Hence, the taxpayers must be careful.
4. As per the proviso to Section 39(9) of the CGST Act, 2017, no rectification of any omission or incorrect particulars shall be allowed in the returns after the thirtieth day of November following the end of the financial year to which such details pertain, or the actual date of furnishing of the relevant annual return, whichever is earlier. Hence, the question remains whether such a request would stand the test of the judiciary.
Notwithstanding the above points, it remains that it is now very apparent that filing GSTR-3B should not be seen as a mere formality. Correct disclosures may save taxpayers from litigation, and wrong disclosures may put them into litigation. Many taxpayers who had not implemented Circular 170 should start filing the return the right way, or else there would be losses to the state governments, and penalties for non-compliance may be made.
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