Taxmen cite mismatch of ITC claimed in GSTR-3B and GSTR-2A, give 10 days to explain
A large number of assessees under the GST have received notices from the tax department asking them to explain the mismatch of input tax credit (ITC) claimed in the self-declared summary return GSTR-3B and the auto-generated, but currently suspended, GSTR-2A. The notices have granted a period of 10 days to explain discrepancy, failing which proceeding would be initiated against the taxpayers. Although the department has intensified its enforcement effort in the last month which is reflected in the spurt of notices received by taxpayers, it is the first time they have used a return form, which is not being used by taxpayers since it was suspended in November last year.
GSTR-2A is generated by the system on the basis on information received from GSTR-3B and GSTR-1 (sales details). When the sellers of assessees file GSTR-1 in any particular month, its details are captured by GSTR-2A thus providing the details of purchases of the assessee concerned. Since ITC claimed in GSTR-3B should ideally match ITC available on all the purchases made by an asseessee, a mismatch can be detected by comparing the details in these two forms.
However, experts say that a mismatch doesn’t necessarily implicate a taxpayer and several other factors could be responsible for the same. “Numerous reasons could be attributed to these discrepancies which include, contradicting circulars over a period of time, frequent changes in law, suspension of GSTR-2, technical incompetence at GSTN.
Policymakers need to assure that tax officers pursue such notices in a non-coercive manner and appreciate the practical difficulties faced by taxpayers in filing of tax returns,” Rajat Mohan, partner, AMRG & Associates, said. In the past month, taxpayers have received notices for non-filing of GSTR-3B, and mismatch in details between GSTR-3B and GSTR-1. The latest batch of notices suggest that tax department is using all possible tools at its disposal to detect evasion, a tax official said.
The tax department’s move of using GSTR-2 was expected among assessees and tax practitioners as reported by FE earlier. These assessees had also started using GSTR-2 and GSTR-2A to ensure that the ITC claimed in GSTR-3B was being reconciled. GSTR-2 helps them provide evidence of tax contents in the goods and services they consumed, and thereby validate the credits claimed.
The GSTR-2 form provides a business details on the status of suppliers’ tax filing and gives the entity greater control over choosing a vendor. This also allows a firm to ensure that its suppliers are paying taxes on time so that it can claim ITC without any hurdle.
Taxpayers are now mandated to file only the outward-supply return GSTR-1 and a simple summary interim return GSTR-3B, with which they pay tax and claim input tax credits. Filing of comprehensive returns with attendant invoice-matching facility was suspended following complaints. Taxpayers had complained of huge compliance burden and also the GST Network’s inability to handle the traffic. The widespread use of GSTR-2 is despite the GST Network not providing the facility of filing it right now.