CBIC Clarification: ITC Difference Due to Mismatch in GSTR 3B and GSTR-2A

In response to the changes recommended in the 50th GST Council meeting, the Central Board of Indirect Taxes and Customs (CBIC) issued a circular no. 193/05/2023-GST on 17th July 2023, providing clarifications regarding Input Tax Credit discrepancies.

To maintain consistency in the implementation of the law across field formations, the Board, under the authority granted by section 168(1) of the CGST Act, Circulars were issued as discussed in the Article.

Circular No. 183/15/2022-GST dated 27th December 2022, which previously addressed the disparity in ITC availed in form GSTR-3B compared GSTR-2A form for FY 2017-18 and 2018-19, will be applicable for the period from 01.04.2019 to 08.10.2019, as rule 36(4) became effective from 09.10.2019 only.

For the period from 09.10.2019 to 31.12.2019, rule 36(4) of CGST Rules permitted registered persons to avail ITC for invoices or debit notes not furnished by suppliers under sub-section (1) of section 37, subject to certain conditions. The guidelines provided in Circular No. 183/15/2022-GST dated 27th December 2022 will apply for verification of the condition of clause (c) of sub-section (2) of Section 16 of the CGST Act for this period. However, the ITC availed for such invoices or debit notes shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes furnished by the suppliers.

Similarly, for the periods from 01.01.2020 to 31.12.2020 and 01.01.2021 to 31.12.2021, rule 36(4) of CGST Rules allowed an additional credit of 10% and 5%, respectively, in excess of the credit reported by suppliers in FORM GSTR-1 or IFF. The guidelines provided in Circular No. 183/15/2022-GST dated 27th December 2022 will apply for verification of the condition of clause (c) of subsection (2) of Section 16 of CGST Act for these respective periods, with the condition that ITC availed for such invoices or debit notes shall not exceed 10% or 5% of the eligible credit available for invoices or debit notes furnished by the suppliers.

Consequent to the insertion of clause (aa) to sub-section (2) of section 16 of the CGST Act and amendment of rule 36(4) of CGST Rules w.e.f. 01.01.2022, no ITC shall be allowed for the period 01.01.2022 onwards in respect of a supply unless the same is reported by suppliers in their FORM GSTR-1 or using IFF and communicated to the said registered person in FORM GSTR-2B.

The proviso to rule 36(4) of CGST Rules, inserted vide Notification No. 30/2020-CT dated 03.04.2020, applies cumulatively for the period February to August 2020, and ITC shall be adjusted on a cumulative basis for the said months in return for the tax period of September 2020. Similarly, the second proviso to rule 36(4) of CGST Rules, substituted vide Notification No. 27/2021-CT dated 01.06.2021, applies cumulatively for the period April to June 2021, and ITC shall be adjusted on a cumulative basis for the said months in return for the tax period of June 2021. This should be considered when determining the ITC eligibility for these tax periods.

The CBIC circular specifies that these instructions are applicable only to ongoing proceedings in scrutiny, audit, investigation, etc., for the period 01.04.2019 to 31.12.2021 and do not apply to completed proceedings. However, these instructions will be applicable in cases during the period 01.04.2019 to 31.12.2021, where any adjudication or appeal proceedings are still pending.

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