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) ?

[Sadanand Bulbule]

 Under the such situations, techincally levy of interest and penalty is unwanted. Effective representation is required. 

[KASTURI SETHI]

No interest is payable and no penalty is imposable. ITC cannot be denied in this scenario. Go through the following case laws in your favour:-

(i)  in the case of 2025 (10) TMI 607-SC Order Shanti Kiran India (P) Ltd. 

(ii) 2025 (12) TMI 756-Gauhati High Court Party Meleod Russel India Ltd. Vs. UOI

[Raam Srinivasan Swaminathan Kalpathi]

In my opinion, to specifically obviate these kind of litigations Rule 37A was inserted vide Notification No. 26/2022 dated 26-12-2022.

Reproduced hereinbelow for convenience:

"37A. Reversal of input tax credit in the case of non-payment of tax by the supplier and re-availment thereof.- Where input tax credit has been availed by a registered person in the return in FORM GSTR-3B for a tax period in respect of such invoice or debit note, the details of which have been furnished by the supplier in the statement of outward supplies in FORM GSTR-1 2[, as amended in FORM GSTR-1A if any,] or using the invoice furnishing facility, but the return in FORM GSTR-3B for the tax period corresponding to the said statement of outward supplies has not been furnished by such supplier till the 30th day of September following the end of financial year in which the input tax credit in respect of such invoice or debit note has been availed, the said amount of input tax credit shall be reversed by the said registered person, while furnishing a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year:

Provided that where the said amount of input tax credit is not reversed by the registered person in a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year during which such input tax credit has been availed, such amount shall be payable by the said person along with interest thereon under section 50.

Provided further that where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the said registered person may re-avail the amount of such credit in the return in FORM GSTR-3B for a tax period thereafter.]"

Source:  Courtesy TMI

If the period of demand anti-dates to 26-12-2022 then the RTP availing ITC may have a case, else, better to follow the spirit of Rule 37A.  Experts may correct my view.

[Shilpi Jain]

Specific provision of rule 37A will come to your rescue. Cannot ask to reverse until Nov of next year if the supplier does not file 3B by then. Ideally by that time the department should take action against supplier and not require recipient to reverse credit or pay interest.

[Shilpi Jain]

The department can neither unjustly enrich itself nor penalise the recipient for its inefficiency in collection/recovery!!

AI Summary

Input tax credit shown in 2B may require reversal under Rule 37A if supplier hasn't filed GSTR 3B, affecting interest exposure. The dispute centers on whether a recipient may claim ITC shown in GSTR 2B when the supplier has not filed the corresponding GSTR 3B, given section 16(2)(c) requires tax on the supply to have been actually paid. Rule 37A prescribes reversal by 30 November following the financial year end where the supplier fails to file GSTR 3B, and allows re availment if the supplier later files; failure to reverse makes the amount payable with interest under Section 50. Practitioners debate interest liability and practical monitoring burdens.