Understanding Input Tax Credit Discrepancies: Key Highlights from Recent GST Clarifications under Circular No 183

02March

Understanding Input Tax Credit Discrepancies: Key Highlights from Recent GST Clarifications under Circular No 183

<div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">The Central Board of Indirect Taxes and Customs (CBIC) has recently issued a document providing crucial clarifications regarding the discrepancies in Input Tax Credit (ITC) as reported in GSTR<span>-3</span> B and GSTR<span>-2</span> A for the financial years <span>2017</span> -<span>18</span> and <span>2018</span> -19. This guidance serves to address concerns arising from suppliers’ inaccuracies in reporting outward supplies, leading to potential issues for registered persons claiming ITC. Below are the key highlights from this important communication.</div><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">1. Addressing ITC Discrepancies</h3><div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">The document acknowledges that discrepancies between ITC claimed in GSTR<span>-3</span> B and what’s reflected in GSTR<span>-2</span> A often arise due to suppliers failing to accurately report their outward supplies. Registered persons may claim ITC that is not reflected in their GSTR-2A, prompting scrutiny by tax officers who view these discrepancies as possible ineligible ITC.</div><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">2. Verification Procedures Established</h3><div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">To ensure compliance and uniformity, the guidelines establish procedures for officers to verify claims of ITC.</div><ul style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;list-style:disc;margin:0px;padding:0px 0px 0px 2em;word-spacing:0px;"><li style="margin-bottom:0px;margin-right:0px;margin-top:0px;padding:0px;"><div style="margin:0px;padding:0px;">For discrepancies exceeding <strong>Rs 5 lakh</strong>, registered persons must provide a certificate from their supplier or a Chartered Accountant (CA), affirming that the supply has indeed occurred and that tax has been paid. This verification process includes a requirement for a Unique Document Identification Number (UDIN) that can be verified online [<span style="padding:0px 2px;"><strong>4a</strong></span> ].</div></li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;"><div style="margin:0px;padding:0px;">For discrepancies <strong>up to Rs 5 lakh</strong>, a similar certificate is needed but must only come from the concerned supplier [<span style="padding:0px 2px;"><strong>4b</strong></span> ].</div></li></ul><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">3. Specific Relaxations for FY <span>2017</span> -<span>18</span></h3><div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">Notably, it was highlighted that discrepancies for the financial year <span><strong>2017</strong></span> <strong>-</strong><span><strong>18</strong></span> have specific relaxations. Claims made post the due date for filing returns (after September <span>2018</span> ) will not benefit from these relaxations if the supplier did not furnish details of the supply in GSTR<span>-1</span> by the due date for March <span>2019</span> [<span style="padding:0px 2px;"><strong>4c</strong></span> ].</div><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">4. Application of Guidelines</h3><div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">The clarifications are applicable only to ongoing proceedings in audits, scrutiny, or investigations related to FY <span>2017</span> -<span>18</span> and <span>2018</span> -19. This means that they do <strong>not apply</strong> to completed proceedings but may still impact cases where adjudication or appeals are pending [<span style="padding:0px 2px;"><strong>5</strong></span> ].</div><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">5. Case-Specific Guidance</h3><div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">The instructions provided are intended to address bonafide errors in reporting during the specified financial years. It is important to note that while these guidelines are clarificatory, they should be applied considering the individual circumstances of each case [<span style="padding:0px 2px;"><strong>4d</strong></span> ].</div><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">6. Conditions for ITC Claim</h3><div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">To validate ITC claims, officers must check:</div><ul style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;list-style:disc;margin:0px;padding:0px 0px 0px 2em;word-spacing:0px;"><li style="margin-bottom:0px;margin-right:0px;margin-top:0px;padding:0px;">The claimant’s possession of a valid tax invoice.</li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;">Confirmation that goods or services were received.</li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;">Proof of payment towards the value of the supply [<span style="padding:0px 2px;"><strong>3</strong></span> ].<a href="https://cms.plasament.com/storage/cir-183-15-2022-cgst.pdf">cir-183-15-2022-cgst</a><br> </li></ul>

Understanding Input Tax Credit Discrepancies: Key Highlights from Recent GST Clarifications under Circular No 183

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