Challenges in Availment of Input Tax Credit
Invoice matching to avail ITC i.e. ITC is said to be allowed only when the supplier uploads the invoice containing the GSTIN & other details of the recipient & pays the GST thereon to the Government. The last 4 half years’ experience has shown the various technical glitches for the Government to implement in its full force. The Government was very keen on imposing the same knowing very well that such requirement causes undue hardship to the Taxpayers. But in the long run Govt is not having any option. The success of GST purely depends upon the matching.
Original Scheme of GST law
Section 42 specifies the mechanism for matching, reversal and reclaim of ITC wherein it was clearly stated the details of every inward supply furnished by a registered person shall be matched with the corresponding details of outward supply furnished by the supplier in such manner and within such time as may be prescribed. Accordingly, Rule 69 was framed to specify that the ITC shall be matched under Section 42 after the due date for furnishing the return in GSTR-03. Further, the first proviso to Rule 69 also states that if the time limit for furnishing Form GSTR-01 specified under Section 37 and Form GSTR2 specified under Section 38 has been extended then the date of matching relating to claim of the input tax credit shall also be extended accordingly. Due to practical difficulties got has introduced 3B as a temporary return but now it is all most all permanent However, due to various numerous challenges in the implementation of GSTR-2 & GSTR-3, the Government has extended the time limits for filing GSTR-2 and GSTR-3 from time to time and later indefinitely. In absence of a requirement to file GSTR-2 and GSTR-3, the ITC matching mechanism prescribed u/s. 42, r/w. Rule 69, will also get deferred and become inoperative.
Modified structure
Acknowledging the difficulties in the original scheme of returns filing and attached ITC matching, the Government has introduced Section 43A of CGST Act, 2017 inter alia specifying that ITC would be allowed even on the unmatched invoices also subject to a maximum cap of 20% on the matched ITC then it has reduced 10 and now it is only 5%. In Sep 2018, 2A made available to taxpayers and which is dynamic in nature i.e every now and then it is being changed on upload of invoices from the supplier side. It was very difficult to keep on updating reconciliation workings as it is keep on changing. GSTR-2B which is a static statement is made functional for July 2020 on a trial run however, for the subsequent tax periods the same could be fully operational. While referring to the provisions of law, it is imperative to note that the law does not provide any legal sanction. GSTR-2B which was actually notified with effect from January 2021 onwards which is. 2B is static in nature. GSTN would make 2B available on 14th of the succeeding month.
Benefits of 2B
Issues with Current Situation
Our Observation and Requirement as expected
Conclusion
As a whole matching concept is a very good tool to minimize departmental audit and for self-assessment. Without matching probably a number of department audits will be more in the future. If you want to minimize litigations, matching is the ultimate tool. Hence even though we are having a lot of practical difficulties we need to promote the matching process. Govt. has to take a lenient view at least for initial 4-5 years. If they start harsh action against taxpayers maybe the whole concept of GST will fail.
