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 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.