FAQ on September GSTR-3B issues

By Mr. C.A. Arup Dasgupa. FCA, CS, IFRS,

Kolkata, West Bengal Email id : dgarup@gmail.com

phone : 98315 03290

FAQ 1 : Why is everyone saying that the last date for availment of ITC for 2020-21 is very close?

Reply : In terms of Section 16(4) of the CGST Act a registered person shall not be entitled to take Input Tax Credit (“ITC”) in respect of any invoice or debit note for supply of goods or services or both, after the due date of furnishing of the Form GSTR-3B for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

So for all invoices and debit notes issued during 2020-21, the last date for availment of ITC would be due date of September 3B for the relevant tax payer.

FAQ 2 : Ok. So what do we need to keep in mind towards this ?

Reply : We need to carry out all the reconciliations so that no credit is missed by the taxpayer and at the same time all the required reversals have been done.

We will now briefly discuss the reconciliations :

1. Reconciliation of ITC as shown under Table 4 of Form GSTR-3B viz-a- viz ITC as per books of accounts

Identify the credits which have not been claimed in the 3B of 2020-21 or between April 21 to August 21. However we need to be careful so that invoices are not claimed again (twice) due to some mismatch in the invoice numbers while doing the annual reconciliation.

2. Reconciliation of ITC as shown under Table 4 of Form GSTR-3B viz-a-viz ITC as per GSTR-2A/ 2B:

In case any ITC has been claimed but the same is not reflecting in the GSTR 2A/2B and it exceeds the entitlement of 5% over and above the amount reflected in 2A/2B, the same would need to be reversed.

However while doing this reconciliation we need to keep in mind that due to imposition of Lockdown throughout the country relaxations had been given in claiming ITC. The same is reproduced below.

Vide notification No. 30/2020- Central Tax, dated 03.04.2020, a proviso has been inserted in CGST Rules 2017 to provide that the said condition shall not apply to input tax credit availed by the registered persons in the returns in FORM GSTR-3B for the months of February, March, April, May, June, July and August, 2020, but that the said condition shall apply cumulatively for the said period and that the return in FORM GSTR-3B for the tax period of September, 2020 shall be furnished with cumulative adjustment of input tax credit for the said months in accordance with the condition under rule 36(4).

Therefore the provisions of Rule 36(4) needs to be matched accordingly

In case the tax payer has claimed ITC but it is not shown by the vendor in their return (GSTR-1) we need to follow up with the vendor for needful updation.

FAQ 3 : My vendor has confirmed that they have reflected our invoices in GSTR1. But I am unable to see it in my GSTR2A/2B. What should I do ?

Reply 3 : Please confirm with the vendor whether he has reflected it under B2B or some other head. In case he has shown it under some other head, he can amend the same in GSTR1 for the month of September and show it under B2B.

FAQ 4 : How can we reconcile the ITC available with the Annual Accounts or Financial Statements?

Reply 4: We need to review all expenses headwise and capital assets ledgers to identify if any eligible credit has been missed to be availed; Therefore if the total eligible ITC as per the head of expenses is 100 but the ITC availed for 2020-21 is 90, we need to avail the balance ITC in September 21.

While carrying out the reconciliation we also need to review whether under any head we have wrongly availed any ineligible credit. Hence we need to test whether ITC has been availed on any of the heads where ITC is blocked under Section 17(5).

FAQ 5 : I am making both taxable and exempted supplies. I have reversed the ITC on the common credit portion every month. Now do I need to do anything further?

In terms of Rule 42 of the CGST Rules, 2017, amount of reversal of common ITC on inputs and input services used for making both taxable and exempted supplies, shall be calculated finally for the financial year before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit relates.

So we are given a final opportunity to do the reconciliation of the reversals under Rule 42 and Rule 43 and in case there is any shortage or excess we need to consider the same in the September 3B.

So every registered person engaged in making taxable as well as exempted supply of goods or services are required to work out the reversal of common ITC for the FY 2020-21 based on annual turnover, on or before the end of due date of filing of Return for the month of September 2021 and then depending upon whether there is excess reversal or short reversal the following action needs to be taken.

FAQ 6 : In case I have reversed credit in excess than the credit that I had to reverse during the financial year what should I do ?

Reply : Where the amount of reversal determined finally at the end of the year is more than what is determined as reversible under Rule 42(2), such excess credit shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates.

So for 2020-21 in case you have reversed ITC of 100, but as per the final computation as prescribed under Rule 42, you have to reverse only 85, then the excess reversal of 15 can be claimed as credit latest in September 21 3B. The credit has to be claimed under the head any other ITC and the workings needs to be kept as supporting for the credit availed.

FAQ 7 : As per our final calculations of reversal, there is a short reversal during 2020-21, so what do we need to do now.

Reply 7 : Here we would need to refer to Rule 42(2)(a)

42(2)(a) where the aggregate o f the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1 and ‘D2’, such excess shall be reversed by the registered person in FORM GSTR-3B or through FORM GST DRC-03 in the month not later than the month of September following the end of the financial year to which such credit relates and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from the first day of April of the succeeding financial year till the date of payment; or

Therefore in case of short reversal made, the differential amount of ITC will need to be reversed now with interest @ 18% per annum for the period starting from April 01, 2021 till the date of payment.

The reversal can be made either through Form GSTR-3B ( not later than September 21) or through Form GST DRC03 by September 21. So in case the ITC has not been reversed through DRC 03 by September 21, the other option would be to reverse it now in September 21 3B along with interest from April 21

FAQ 8 : What are the treatments for excess or short reversal in case of ITC on capital goods used for taxable supplies as well as exempt supplies?

Reply 8 : The treatments as mentioned above for ITC other than capital goods will similarly apply for ITC on capital goods. Here Rule 43(2)(a) states the provisions for the same.

FAQ 9 : As I had some commercial issues with a vendor, I have not made payments to him for invoices of 2020-21. So do I need to do anything?

Reply 9: We need to ensure that the invoices of vendors/suppliers which are not paid within 180 days from date of issuance of invoice then, ITC availed on such invoices need to be reversed due to such non-payment along with interest and such reversed credit can be again re-claimed upon payment made to the vendor as per Rule 37(3).