Most countries in the world have adopted GST a lot earlier than India. But there are lot of variations in tax forms of these countries when compared to GST in India. Goods and Services Tax in India differs from other countries in two important aspects; firstly, the levy of Integrated GST on interstate supply of goods or services or both, secondly, the requirement for matching of input tax credit under GST.
The procedure followed for matching input tax credit under GST would not only ensure that due revenue is transferred to importing state but, would also ensure that the importing tax payer can claim the ITC that he would be entitled to.
Matching of input tax credit in GST is an extended version of the current structure being followed for value added tax by some of the states in India.
2. Matching of Input Tax Credit under GST
The supplier furnishes details of outward supplies made by him in return GSTR 1 and recipient files the return for the inward supplies received by him by taking action in return GSTR 2 for the auto populated return filed by his supplier in GSTR 1.
And when the monthly return in Form GSTR 3 is filed, the details of inward supply furnished by the recipient shall be matched with the corresponding details of outward supply furnished by the supplier in his return for the same or earlier tax period.
In the process of such matching, the information pertaining to such inward supplies which matches with the details of outward supplies shall be finally accepted and shall be accordingly communicated to the recipient.The mismatch may arise due to following reasons:
- ITC availed by the recipient is more than the tax declared by the supplier
- ITC availed by the recipient but outward supply is not declared by the supplier
- Bogus claim of Input Tax Credit by the recipient
For mismatch of nature as mentioned in clause (a) or (b), the discrepancy shall be communicated to both the supplier and recipient with an option to rectify the discrepancy in the return for the month in which the discrepancy is communicated.
Any difference noticed by the authorized officer shall be communicated to the concerned person by serving a GST mismatch notice in Form GST ASMT-10.
- Content of the form
- Observations of the officer
- Time available to the taxpayer to give his explanation in response to this notice.
- Tax amount that is different and is the reason for the discrepancy may or may not be mentioned in this form.
For mismatch of nature on account of duplication or bogus claim of input tax credit is concerned, the discrepancy shall be communicated only to the recipient and the excess amount shall be summed up to the output tax liability of the recipient of the same month in which discrepancy is communicated.
For GST mismatch under clause (a) and (b) above, when the communication is made, the supplier or recipient shall accordingly rectify the discrepancy in the return for the month in which the discrepancy is communicated.
Wherein if the discrepancy is ultimately not rectified by the supplier or recipient, the tax discrepancy shall be added to the output tax liability as under:
- If the taxable person making outward supplies does not rectifies the discrepancy then the excess input tax credit so availed by the recipient shall be added to the output tax liability of the recipient in the month succeeding the month in which the discrepancy is communicated along with due interest from the date of availing of credit till the corresponding additions made in his return.
- If the taxable person making outward supplies in GST, later on declares the details of the Invoice and/or debit note in his valid return then the recipient shall be eligible to reduce his output tax liability which was added earlier in his return. Also, the Interest paid if any shall also be refunded to the purchasing dealer.
3. Time limit to rectify such GST mismatches
It is very much relevant to note here that, no such rectification of invoices/reclaim of input tax credit shall be allowed after due date for filing of return for the month of September of the following year or date of filing of Annual Return, whichever is earlier.
Say, if the invoice pertains to Financial year 2016-17, then in that case it should be rectified before filing the return of September 2017 i.e. 20th October 2017 or date of filing of annual return for F.Y. 2016-17 whichever is earlier, It is important to note that in case such period lapses, no such rectification is allowed and input tax credit related to them will be lost.
The whole process of matching mechanism seems to be highly automated and thus all the returns of selling dealer as well as purchasing dealer will be linked with each other, so that any change on one side will be correspondingly reflected on the other side. Thereby, both the seller as well as purchaser is required to be very careful in filing the returns and in uploading sale / purchase details. Even a mismatch in the detail of a small magnitude will lead to unnecessary demands and may also lead to litigation for recovery of tax.