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CBIC Guidelines for Dealing with Input Tax Credit Discrepancies

The Central Board of Indirect Taxes and Customs (‘CBIC’) has recently issued a significant circular numbered 193/05/2023-GST on July 17, 2023, addressing the challenges related to Input Tax Credit (‘ITC’) discrepancies for the period between April 1, 2019, to December 31, 2021. This circular is an extension of Circular No. 183/15/2022-GST, which dealt with the same subject matter but for financial years (‘FY’) 2017-18 and 2018-19.

The circular focuses on Rule 36(4) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’), which permits additional credit in Form GSTR-3B compared to Form GSTR-2A up to specific limits during various periods. It emphasizes that availing such additional credit is subject to the conditions specified in Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’), which includes the requirement for the supplier to have ‘actually paid’ the tax on the said supply.

Further, the guidelines provided in this circular apply to ongoing proceedings in scrutiny, audit, investigation, etc., for the period from April 1, 2019, to December 31, 2021, and not to concluded proceedings. The circular categorizes different periods within the specified timeline, with varying limits of additional credit allowed, and provides clarifications through illustrative examples to ensure uniformity in implementing the provisions of the law across field formations.

For the period from April 1, 2019, to October 8, 2019, Circular No. 183/15/2022-GST will be applicable in its entirety. For the period from October 9, 2019, to December 31, 2019, the rule allows for 20% additional credit, for January 1, 2020, to December 31, 2020, it is 10%, and for January 1, 2021, to December 31, 2021, it is 5%.

The CBIC also clarifies that Rule 36(4) of the CGST Rules was meant to be a facilitative measure, allowing ITC availed in cases where suppliers might have delayed furnishing details of outward supplies. However, availing ITC under this rule is contingent upon fulfilling the conditions stated in Section 16 of the CGST Act.

Taxpayers need to comprehend and adhere to these guidelines while dealing with ITC discrepancies during the specified period. Compliance with the prescribed rules is essential to protect taxpayer interests, maintain the integrity of the GST system, and prevent undue scrutiny and challenges during tax proceedings.

Authored by Srishty Jaura, Advocate at Metalegal Advocates. The views expressed are entirely personal and do not constitute legal opinion.


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