Liability not reported or input not availed pertaining to Previous financial year ?

As the Financial year 2019-20 has ended and with this lot of queries have been raised by the taxpayer’s related to invoices, input tax credit and liability which they have forgot to consider in the previous financial year. For considering these, we have explained two scenarios in this article for better understanding and for removal of doubts:

• Input tax credit which has not been taken related to previous financial year
• Invoices and liability not filed/paid in GSTR-1 and GSTR-3B respectively related to previous financial year 

The above two cases have been explained below:

1. Time Limit for claiming ITC for the FY 2019-20.

In GST, Input tax credit plays an important role for the businesses in terms of reducing cost of product, reducing output tax liability, removing cascading impact etc.

Due to the above benefits, a buyer is more aggressive to get the invoices from supplier to avail the input tax credit in their business but sometimes, a taxpayer does not avail the input tax credit in the same financial year and some of the reasons that are as follows:

• Invoice not received/late received/misplaced
• Invoice not issued by supplier
• Goods or services or both not received/provided
• Debit note not issued by the supplier due to any reason
• Credit note not issued by the supplier due to any reason etc.

For this, government has considered these practical issues at the time of drafting the Input tax credit laws under GST and inserted Sub section (4) of Section 16 of CGST Act 2017 and as per this section:

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Input tax credit related to Tax Invoice and Debit Note:

A registered person who has not availed the input tax credit in respect of any 'invoice' or 'debit note' in the previous year due some circumstances, is eligible to take the input tax credit up to the earlier of the followings:

• Due date of filing of return under section 39 for the month of September i.e. 20^th October; or
• Date of furnishing of annual return for the relevant financial year

Input Tax credit related to Credit Note:

Under Section 16(4) of CGST Act, only ‘tax invoice’ and ‘debit note’ have been considered but the credit note has been explained under Section 34(1) of CGST Act, 2017.

As per sub-section (1) of section 34 of CGST Act 2017, Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.

In simple terms: Credit note can be issued by the supplier:

• When excess tax has been charged in the tax invoice for the goods or services or both:, or
• The goods have been returned by the recipient based on the fact that goods or services or both found to be deficient.

Under Section 16(4) of CGST Act 2017 no time limit has been defined from the point view of recipient i.e. if the taxpayer has not reversed the input tax credit related to that credit note in the month to which it pertains, he has to pay the interest as per Section 50 of CGST Act 2017 from the date on which he has taken the input tax credit related to the tax invoice to the date of reversal at the time of filing his monthly return.

For better understanding, we have explained the above by the following examples:

For Tax invoice and Debit Note:

Period	Time Limit as per Section 16(4) of CGST	Remarks
FY 2018-19	Earlier of 20th Oct 2019 Or Date of filing of Annual return	-Due date for the month of Sep’19 return is 20th Oct 2019 - Date of furnishing of annual return for the FY 2018-19 i.e. 30th Sep 2020.
FY 2019-20	Earlier of 20th Oct 2020 Or Date of filing of Annual return	-Due date for the month of Sep’20 return is 20th Oct 2020 -Date of furnishing of annual return for the FY 2019-20 i.e. 31st  Dec 2020.

For Credit Note:

Period of Credit Note	Time Limit to reversed input tax credit	Interest
Mar’2020	20th April 2020	Beyond time limit interest under Section 50(2) @ 18%p.a. is applicable on the amount of credit note form the date of credit note to date of reversal in the return
April’2020	20th May 2020

 

Further, some of the basic conditions for availing input tax credit are as follows:

• Invoice has been received(invoice is mandatory)
• Goods or services or both has been delivered/received
• Tax on sale has been paid by supplier
• Invoice should be reflection in GSTR-2A
• Payment has been made within 180 days from the date of invoice
• Use or intend to use for business purpose
• Outward supply should be non-exempted
• Claimed either input or depreciation etc.
• Input should not be Blocked Credit as per Section 17(5) of CGST Act 2017.

2. Impact for Invoices which have not been considered in GSTR-1 and also liability not paid in the financial year:

As we know we have to file monthly/quarterly GSTR-1 for the invoices which have been issued in a month and have to pay the liability against the same in the GSTR-3B but somehow when a taxpayer forgets to consider any invoice in the GSTR-1 and also did not consider the liability against these invoices at the time of filing of GSTR-3B. Also, we know that once the return is filed cannot be revised. For considering these, we have explained the above two issues and their solution as follows:

Invoices not uploaded in GSTR-1

If the taxpayer forgot to file any invoice in GSTR-1 of a particular month, and the return for the same has also been filed, he can consider these invoices in the next month of the GSTR-1 with the actual date of invoice.

Invoices not consider at the time of GSTR-3B

If the taxpayer forgot to consider any invoice at the time of calculating the liability of GSTR-3B of the particular month and the return for the same has also been filed, he has to pay the liability in the next month GSTR-3B along with the interest as per Section 50 of CGST Act 2017 from the date of invoice to date of payment.

For better understanding we have explaining the above two scenario with following table:

Period of Invoices	Consider in GSTR-1	Consider in GSTR-3B	Solution
Jan’2020	NO	NO	Consider these invoices in the next month GSTR-1 i.e. Feb’20 return Consider the liability in next month GSTR-3B along with interest.
Mar’20	NO	Yes	#Consider these invoices in the next month GSTR-1 i.e. April’20 return. Also, in these case financial year has also changed therefore, taxpayer has to disclose these value of invoices in Annual return separately.
Mar’20	Yes	NO	Consider the liability in next month GSTR-3B along with interest. Also, in these case financial year has also changed therefore, taxpayer has to disclose these liability in Annual return separately.
April’20	Yes	No	Consider the liability in next month GSTR-3B along with interest.

 

Opinion:

Related to input tax credit: 

As per our opinion and for the benefit of all the taxpayer, he can reconcile his input tax credit for the month with his GSTR-2A on regular basis because sometimes the taxpayer has not received the copy of invoice, debit note and credit note but supplier has uploaded in his GSTR-1 and same is reflecting in taxpayer’s GSTR-2A. Due to this, the taxpayer claim his input tax credit based on tax invoice and debit note and reverse his input tax credit based on credit note in a timely manner to avoid unwanted working capital crunch and interest implication respectively.

Related to output tax liability:

# Important: In GST Law, no time limit has been defined to file the invoices for the last year in the current month GSTR-1 but if we see Section 16(4) of CGST Act 2017, which states that time limit to claim the Input for the last financial year is up to the earlier of "due date of GSTR-3B of September and date of annual return'. Therefore, by considering section 16(4) of CGST Act, we are of the opinion that invoices for the last financial year must be filed on or before the due date of GSTR-1 for the month of September to avoid any unnecessary input queries from buyer's side.

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