[Opinion] Whether Form GSTR-2B is a Bible for availing ITC under GST?

A study of the GST law as far as claim of input tax credit (ITC, in short) is concerned reckons that it is inextricably linked to the compliance related provisions and it was wholly dependent on what the government has been touting i.e., a new concept of online matching. However, non-operationalisation of the matching concept on GSTN portal and arrangements made by government to get the same done manually from taxpayers gives a reflection of ‘asking the recipient to do the impossible’ and a paradox like situation in which all taxpayers were put into without any relief.

1. On account of failure to enforce matching through common portal, the recipients were always in dilemma over manner to ensure compliance with matching of input tax claims. A stop-gap arrangement introduced vide Rule 61(6) of the GST Rules continued to govern the field which provides for reconciliation of all claims in Form GSTR-3 wherein the figures as per Form GSTR-1, GSTR-2, GSTR-3B will auto-populate; figures auto-populated for Form GSTR-3B would be editable in nature, and adequate adjustment towards balancing amounts would be given which can either be additional payment of taxes or additional claim of ITC or vice-versa.

2. However, the government retrospectively omitted said sub-rule on 09.10.2019 vide Not. No. 49/2019-CT dated 09.10.2019. On this, hon’ble Supreme Court in the case of Union of Inida v. Bharti Airtel Ltd. [2021] 131 taxmann.com 319/[2022] 89 GST 1 stated that though the question regarding validity of said retrospective amendment is not before us but it is made clear that section 39(9) is the parent provision which provides that error or omission, if any, are to be rectified in return to be filed for the month in which they are observed. The relevant paras are reproduced hereinbelow for reference:

3. Therefore, hon’ble Supreme Court upheld that taxpayer’s have to self-assess their claims of ITC in the returns filed and if any error or omission is observed, the same has to be rectified in Form GSTR-3B filed for the tax period in which said error or omission is observed.

4. It is notable that section 38(1) read with rule 60(1) as stood prior to 01.01.2021, emphasized that preparatory work for claim of ITC has to be done by the assessee himself. The role of electronic communication between registered persons in Form GSTR-1A, or of matching in terms of section 42 and 43 of the GST Act comes thereafter. At first, the assessee has to self-assess his claim of ITC. At this juncture, it is relevant to refer the relevant para 36 of the Bharti Airtel Ltd. (supra) wherein Hon’ble Supreme Court upheld as under:

“36. Section 59 does make reference to Section 39, which deals with furnishing of returns, but the fact remains that for furnishing of returns, preparatory work has to be done by the Assessee himself and is not fully or wholly dependent on the common electronic portal for that purpose……….”

An attempt made by Government to ensure matching manually: shifting the entire focus of condition as per section 16(2)(c) to availability of invoice in Form GSTR-2A

5. Having observed huge unmatched credit and failure to implement electronic matching, it was decided in 37^th GST Council Meeting held on 20^th September 2019 that a reasonable restriction shall be imposed on credits appearing in Form GSTR-2A so that amount of unmatched credit be reduced and taxpayers are encouraged to declare the details of supplies in Form GSTR-1.

6. Government inserted a sub-rule (4) in Rule 36 w.e.f. 09.10.2019. By doing so, the recipients were made liable to match the ITC manually. It was clear that the entire focus has been shifted from the condition regarding payment of taxes by corresponding supplier i.e., section 16(2)(c) to the presence of invoice in Form GSTR-2A though without any corresponding provision in this regard in the statutory paperbook.

7. No mechanism was provided to ensure compliance with the one of the conditions of section 16 of the GST Act i.e., whether the corresponding supplier has made full payment of self-assessed tax in Form GSTR-3B? Though indirectly, w.e.f. 01.01.2021, the government has ensured that said situation would not arise by way of incorporating sub-rule (6) in rule 59 restricting the facility to furnish statement in Form GSTR-1 if the return in Form GSTR-3B for preceding two months (later on reduced to “preceding month” w.e.f. 01.01.2022) has not been filed; sub-rule (2A) was inserted in rule 21A providing for suspension of registration in case significant difference or anomalies are observed inter-alia in Form GSTR-1 and GSTR-3B. But the taxpayers are still not having a reasonable mechanism to ensure compliance with said condition of payment of taxes by the corresponding supplier.

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