Reversal of Ineligible ITC by Taxpayer in GSTR 3B return Kerala Govt SOP -1/2023
STANDARD OPERATING PROCEDURES FOR MONITORING INELIGIBLE IGST INPUT TAX CREDIT REVERSAL BY TAXPAYERS IN RETURN FORM GSTR 3B
STATE GOODS AND SERVICES TAX DEPARTMENT GOVERNMENT OF KERALA
STANDARD OPERATING PROCEDURES
FOR MONITORING
INELIGIBLE IGST INPUT TAX CREDIT
REVERSAL BY TAXPAYERS IN RETURN
FORM GSTR 3B
(SOP -1/2023)
CONTENTS
1. Introduction
2. Statutory provisions
3. Scenarios with examples
4. Reversal monitoring process
4.1 Selection of cases for verification:
4.2 Proper Officer for verification and follow up:
4.3 Verification schedule:
4.4 Verification Process:
5. Reporting and Monitoring
1. INTRODUCTION
1.1. After the implementation of GST, the State Revenue constitutes SGST paid in Cash and IGST received through Settlement process in GST. Fund transfer from IGST through Settlement is based on the returns filed by taxpayers. Incorrect reporting of Input Tax Credit of IGST on account of inter-state inward supply or import of goods or services or both will result in short settlement of fund transfer to the State.
1.2. The modalities for settlement or transfer of funds from Centre to State or vice versa on account of cross utilisation of IGST or as the case may be of SGST and apportionment of IGST between the Centre, States and within the States are
provided in Section 53 of CGST/SGST Act, Section 17 and 18 of IGST Act r/w the Goods and Services Tax Settlement of Funds Rules, 2017. The GSTN Common Portal, based on the returns filed by the taxpayers, periodically transmits the report of such cross utilisation and the IGST funds available for the apportionment to competent authority. According to such periodic reports furnished by the GSTN, the competent authority transfers funds towards settlement of IGST collected by the Centre on the basis of the cross utilisation of ITC of IGST utilised against CGST/SGST liability and vice versa as well as apportionment in terms of Section 17 of the IGST Act 2017 and Goods and Services Tax Settlement of Funds Rules,2017.
1.3. Aforesaid Fund transfer and apportionment is predominantly based on the information contained in GSTR 3B returns available with GSTN. Hence, it necessitates the availability of correct data/information of GSTR 3B with GSTN for proper settlement and apportionment of fund.
1.4. State GST Department had issued Circulars 6/2020 and modified the same vide Trade Circular No. 1/2022 which contained detailed guidelines as to filing of correct returns declaring details of reversal of ineligible IGST Credit. However
Taxpayers are still reluctant to properly fill up all the columns of FORM GSTR 3B with the belief that no legal consequences to pursue as there is no intention on their part to evade tax. Some of the taxpayers are still not aware of filling all the columns in FORM GSTR 3B. Instances are noticed that in the case of some taxpayers there is huge input tax credit on inward supplies, but outward supplies are exempted. In cases where the tax payer is reluctant to reverse the IGST Credit which is ineligible, IGST credit will go to the indivisible pool and settlement on an ad-hoc basis only will
be received by the State. By virtue of proviso to sub-section (2A) of section 17 of the Integrated Goods and Services Tax Act, 2017, the amount not apportioned under sub-section (1) and sub-section (2) may, for the time being, on the
recommendation of the Council, be apportioned at the rate of fifty per cent to the Central Government and fifty per cent to the State Governments or Union territories, as the case may be, on an ad-hoc basis and shall be adjusted against
the amount apportioned under the said sub-sections. If the actual ineligible IGST credit is properly reversed by the taxpayers of the State, the State will get 50% of the ineligible credit so reversed monthly.
1.5. The purpose of this Standard Operating Procedure is to ensure the proper and timely reversal of the IGST credit which is actually ineligible for the taxpayer and thereby ensuring fifty per cent IGST credit settled against state share on monthly basis than yearly ad-hoc settlement. Instructions for mandatory furnishing of correct and proper information of ineligible/blocked Input Tax Credit and reversal thereof in return in Form GSTR-3B has already issued vide Trade Circular No.1/2022 dated 21.11.2022.
1.6. Under certain circumstances, some of the input tax credit on inward taxable supplies of goods or services or both cannot be claimed by a registered taxable person and the same is treated as ineligible credit as provided under Section 17(1), 17(2), 17(4) and 17(5) of the Central GST and Kerala State GST Act, 2017 read with Rules 38, 42 and 43 of the Central GST and Kerala GST Rules, 2017.
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