- By: Tushar Aggarwal and Surbhi Premi
The landmark Goods and Services Tax (GST) has completed two years. The one-nation, one-tax revolution is witnessing many legal issues but it’s settling down gradually. Recently, the Hon’ble Gujarat High Court has pronounced its judgement on the convoluted saga of the last date of availing ITC relating to invoices issued during the period from July 2017 to March 2018.
In the benevolent decision, the High Court has held that GSTR-3B is not a return in lieu of return required to be filed in Form GSTR-3. The return in Form GSTR-3B is only a temporary stop-gap arrangement till the due date of filing the return in Form GSTR-3 is notified. Meaning thereby, Businesses can still avail ITC of missed out invoices issued during the period from July 2017 to March 2018 till the date of filing of Annual Return in form GSTR-9. Many taxpayers will get relief by this decision of the High Court.
Section 16(4) of the CGST Act provides that the registered person shall not be entitled to avail ITC in respect of any invoice after the due date of furnishing of the return under Section 39 for the month of September following the end of financial year to which such invoice pertains or furnishing of the relevant annual return, whichever is earlier.
Since the return GSTR-3 continued to be deferred due to technical glitches right from its introduction, the question that arose was what could be said to be the return under Section 39. Consequently, what would be the last date for availing ITC relating to invoices issued during the period from July 2017 to March 2018.
GSTR-3B is not a return under Section 39
The Press Release dated 18 October 2018 clarified that with taxpayers self-assessing and availing ITC through return in Form GSTR-3B, the last date for availing ITC in relation to the invoices issued during the period from July 2017 to March 2018 is the last date for the filing of such return for the month of September 2018 i.e. 20th October 2018.
The High Court held the above clarification to be illegal and contrary to Section 16(4) of the CGST Act read with Section 39(1) of the CGST Act read with Rule 61 of the CGST Rules.
The Court further held that GSTR-3B is not a return under Section 39. The due date of filing return under Section 39 for the months of July 2017 to March 2019 shall be subsequently notified in Official Gazette.
A recent decision of the High Court has tried to settle down the controversy as to the last date of availing ITC, but it has given birth to many more controversies. Without going into the legality of the decision, let us quickly have a look at the areas where the decision would have grave implications.
Section 39(7) of the CGST Act provides that registered person who is required to furnish return under Section 39 shall pay to the Government tax due as per return not later than the last date on which he is required to furnish such return. If GSTR-3B is not a return under Section 39, whether it is open for a taxpayer to contend that there is no last date for payment of tax dues till GSTR-3 is notified and therefore, not liable for interest for any delay in payment so far.
Further, 1st Proviso to Section 37(3) of the CGST Act provides that no rectification of error or omission in respect of the details furnished under Section37(1) i.e. GSTR-1 shall be allowed after furnishing of the return under Section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier. If GSTR-3B is not a return under Section 39, it will have a natural consequence where GSTR-1 can be rectified for any mismatch till the date of filing annual return.
So far, all these consequences go in favour of the taxpayer and he would be the happiest ever! Now let us see how this interpretation turns the cards upside-down. Section 16(2)(d) of CGST Act provides that no registered person shall be entitled to ITC in respect of any supply of goods or services or both to him unless he has furnished the return under Section 39. Such an interpretation would put the taxpayers into huge problems as the Businesses have already claimed ITC based on GSTR-3B, without waiting for GSTR-3 to be notified. This interpretation would endanger all the ITC claims of the taxpayers and may even trigger the interest liability.
In author’s view, the decision has much wider implications than the limited question of last date for ITC availment. The decision has opened a Pandora’s Box and one will have to wait to see whether Government brings any amendment to resolve the controversy or what other High Courts decide.
- Tushar Aggarwal is Joint Partner and Surbhi Premi is Joint Director, Lakshmikumaran & Sridharan Attorneys.