ITC cannot be claimed in the month in which its appearing in 2B if supplier has not filed their 3B for the month by due date of that month

[PARTH MEHTA]

Request expert opinion and guidance for the following interesting observation by the Departmental Officer. Our taxpayer has made certain purchases.

 

Regarding purchase from a supplier, Supplier has filed their GSTR-1 and credit is appearing in 2B. However, due to cashflow crunch, supplier has delayed GSTR-3B filing by a month or more.

 

Taxpayer has availed and utilized ITC since the ITC is appearing in GSTR-2B. However, department has contended that taxpayer is not eligible to claim ITC in the month of appearance in 2B since the supplier has not paid taxes this month citing provisions of section 16(2)(c). Ultimately, department is asking for Interest from the date of availment of credit by us till the date when supplier filed GSTR-3B. Legitimacy of ITC is not a question.

 

Section 16 of the GST Acts states that-

2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-

(c) subject to the provisions of, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;

 

The question is, we have complied with provisions of section 38 while availing the credit. Furthermore, provisions of rule 37A (that says Reversal required in November if supplier fails to pay tax) will become otiose

 

Practically as well, how is is possible to check each and every suppliers 3B filing date and file our 3B only after everyone else has filed ? In this manner, who will file the 3B first because my recipients will be depended upon my 3B filing.

Am I liable to pay Interest under section 50(3) read with rule 88B(3) ?

 

AI Summary

Input tax credit claimed before supplier pays GST: Section 16(2)(c) triggers interest demand until GSTR-3B filing/payment Section 16(2)(c) is invoked to prescribe that input tax credit may be availed only where the tax charged on the inward supply has been actually paid to the Government by the supplier, and where the supplier delays furnishing GSTR-3B and payment of tax, the recipient's availment and utilisation of ITC in the intervening period is treated as ineligible for that period. On that basis, the department seeks recovery of interest for the period from the date of availment/utilisation of ITC to the date the supplier files GSTR-3B and pays tax, while not disputing substantive entitlement once tax is paid. Rule 37A is referenced as providing a separate reversal mechanism where the supplier fails to pay tax within the prescribed time, but is argued to be undermined if month-wise deferment of ITC is enforced.