File GSTR-1 & GSTR-3B carefully in 2024 – A small mistake will lead to penalty of Rs.25000

Recently Department started sending notices in case of GSTR-3B not filled properly and levying general penalty of Rs.25000. To understand this first read the below circular:

Read Circular No.170/02/2022-GST Dated 6th July,2022

click here to download circular

Subject:Mandatory furnishing of correct and proper information of inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORMGSTR-3B and statement in FORMGSTR-1 –reg.

The process of return filing has been simplified over a period of time. With effect from December 2020, FORM GSTR-3Bis getting auto-generated on the portal by way of auto-population of input tax credit (ITC) from FORM GSTR-2B (auto-generated inward supply statement) and auto-population of liabilities from FORM GSTR-1(Outward supply statement), with an editing facility to the registered person.

However, it has been observed that there still are some infirmities in information being furnished by the registered person in relation to inter-State supplies effected to unregistered person, registered person paying tax under section 10 of the Central Goods and Services Tax Act, 2017(composition taxable persons) and UIN holders. Also, there appears to be lack of clarity regarding reporting of information about reversal of Input Tax Credit (hereinafter referred to as the “ITC”) as well as ineligible ITC in Table 4 of FORM GSTR-3B

It is desirable that correct reporting of information is done by the registered person in FORM GSTR-3Band FORM GSTR-1 so as to ensure correct accounting and accurate settlement of funds between the Central and State Governments. Accordingly, in order to ensure uniformity in return filing, the Board, in exercise of its powers conferred under sub-section (1) of section 168 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”), hereby clarifies various issues in succeeding paragraphs.

Furnishing of information regarding inter-State supplies made to unregistered persons, composition taxable persons and UIN holders

It has been noticed that a number of registered persons are not reporting the correct details of inter-State supplies made to unregistered persons, to registered person paying tax under section 10 of the CGST Act (composition taxable persons) and to UIN holders, as required to be declared in Table 3.2 of FORM GSTR-3B, under the notion that the taxable value of the same along with tax payable has already been reported in Table 3.1of the said FORM.

Below is Table 3.2 of GSTR-3B

In certain cases, it has also been noticed that the address of unregistered person are captured incorrectly by the supplier, especially those belonging to banking, insurance, finance, stock broking, telecom, digital payment facilitators, OTT platform services providers and E-commerce operators, leading to wrong declaration of Place of Supply (PoS) in both the invoices issued under section 31 of the CGST Act, as well as in Table 3.2 of FORM GSTR-3B

In this context, it may be noted that the information sought in Table 3.2 of FORM GSTR-3B is required to be furnished, place of supply-wise, even though the details of said supplies are already part of the supplies declared in Table 3.1of the said FORM. For assisting the registered persons, Table 3.2 of FORM GSTR-3B is being auto-populated on the portal based on the details furnished by them in their FORM GSTR-1

Accordingly, it is hereby advised that the registered persons making inter-State supplies–

(i) to the unregistered persons, shall also report the details of such supplies, place of supply-wise, in Table 3.2 of FORM GSTR-3B and Table 7B or Table 5 or Table 9/10of FORM GSTR-1, as the case may be;

(ii) to the registered persons paying tax under section 10 of the SGST/CGST Act (composition taxable persons) and to UIN holders, shall also report the details of such supplies, place of supply-wise, in Table 3.2 of FORM GSTR-3Band Table 4A or4Cor 9 of FORM GSTR-1, as the case may be, as mandated by the law.

(iii) shall update their customer database properly with correct State name and ensure that correct PoS is declared in the tax invoice and in Table 3.2 of FORM GSTR-3B while filing their return, so that tax reaches the Consumption State as per the principles of destination-based taxation system.

It is further advised that any amendment carried out in Table 9 or Table 10 of FORM GSTR-1or any entry in Table 11 of FORM GSTR-1relating to such supplies should also be given effect to while reporting the figures in Table 3.2 of FORM GSTR-3B

Furnishing of information regarding ITC availed, reversal thereof and ineligible ITC in Table 4 of GSTR-3B

Table 4(A) of the FORM GSTR-3B is getting auto-populated from various entries of FORM GSTR-2B. However, various reversals of ITC on account of rule 42 and 43 of the CGST Rules or for any other reasons are required to be made by the registered person, on his own ascertainment, inTable 4(B)of the said FORM. It has been observed that different practices are being followed to report ineligible ITC as well as various reversals of ITC in FORM GSTR-3B

It may be noted that the amount of Net ITC Available as per Table 4(C) of FORM GSTR-3B gets credited into the electronic credit ledger (ECL)of the registered person. Therefore, it is important that any reversal of ITC or any ITC which is ineligible under any provision of the CGST Act should not be part of Net ITC Available in Table 4(C) and accordingly, should not get credited into the ECL of the registered person.

In this context, it is pertinent to mention that the facility of static month-wise auto-drafted statement in FORM GSTR-2B for all registered persons has been introduced from August, 2020. The statement provides invoice-wise total details of ITC available to the registered person including the details of the ITC on account of import of goods.

Further, details of the said statement are auto-populated in Table 4 of return in FORM GSTR-3B which are editable in the hands of registered person. It may be noted that the entire set of data that is available in FORM GSTR-2B is carried to the table 4 in FORM GSTR-3B, except for the details regarding ITC that is not available to the registered person either on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply.

It is pertinent to mention that the ineligible ITC, which was earlier not part of calculation of eligible/available ITC, is now part of calculation of eligible/available ITC in view of auto-population of Table 4(A) of FORM GTSR-3B from various tables of FORM GTSR-2B.

Thereafter, the registered person is required to identify ineligible ITC as well as the reversal of ITC to arrive at the Net ITC available, which is to be credited to the ECL.In light of the above, the procedure to be followed by registered person is being detailed hereunder for correct reporting of information in the return.

A.Total ITC (eligible as well as ineligible) is being auto-populated from statement in FORM GSTR-2B in different fields of Table 4A of FORM GSTR-3B (except for the ineligible ITC on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply).

B.Registered person will report reversal of ITC, which are absolute in nature and are not reclaimable, such as on account of rule 38 (reversal of credit by a banking company or a financial institution),rule 42 (reversal on input and input services on account of supply of exempted goods or services), rule 43 (reversal on capital goods on account of supply of exempted goods or services)of the CGST Rules and for reporting ineligible ITC under section 17(5) of the CGST Act in Table 4 (B) (1).

C.Registered person will report reversal of ITC, which are not permanent in nature and can be reclaimed in future subject to fulfilment of specific conditions, such as on account of rule 37of CGST Rules (non-payment of consideration to supplier within 180 days), section16(2)(b)and section 16(2)(c)of the CGST Actin Table 4 (B) (2).

Such ITC may be reclaimed inTable 4(A)(5) on fulfilment of necessary conditions. Further, all such reclaimed ITC shall also be shown in Table 4(D)(1).

Table 4 (B) (2) may also be used by registered person for reversal of any ITC availed in Table 4(A)in previous tax periods because of some inadvertent mistake

D.Therefore, the net ITC Available will be calculated in Table 4 (C) which is as per the formula (4A -[4B (1) + 4B (2)]) and same will be credited to the ECL of the registered person.

E.As the details of ineligible ITC under section 17(5) are being provided in Table 4(B), no further details of such ineligible ITC will be required to be provided in Table 4(D)(1).

F.ITC not available, on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply, may be reported by the registered person in Table 4D(2). Such details are available in Table 4 of FORM GSTR-2B

Accordingly, it is clarified that the reversal of ITC of ineligible credit under section 17(5) or any other provisions of the CGST Act and rules thereunder is required to be made under Table 4(B) and not under Table 4(D) of FORM GSTR-3B

Below are the illustrations

Now Taxpayers are getting below type of notice due to above circular and department is levying General Penalty of Rs.25000:

So Be Extra Careful while filing GSTR- 1 & GSTR-3B

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