Readers may recall that as a Trade Facilitation Measure (or one would be led to believe so!), the Government has already announced the extension of deadlines for filing the prescribed Returns in the Form GSTR-1 and GSTR-2 for the months of July, 2017 and August, 2017 to various dates of September, 2017 as announced. At the same time, it was also announced that a simple return in Form GSTR-3B may be furnished containing the prescribed details for the months of July, 2017 and August, 2017 by 20th August, 2017 and 20th September, 2017 respectively.
However, to their shock and dismay, the taxpayers found that there was no specific provision made in the Form GSTR-3B to declare the transitional credit flowing from the pre-GST era and which could be claimed in terms of Section 140 of the CGST Act, 2017. Adding to these woes of the taxpayers was the fact that for claiming such transitional credit (other than deemed credit) in terms of Section 140, a Form in TRAN-1 is also required to be filed and the due date prescribed for the same is 30th September, 2017.
There were, therefore, apprehensions all around that the taxpayers would not be in a position to utilise the transitional credit for the payment of tax for the month of July, 2017 seriously impacting the cash flow of business. It is also pertinent to note here that GSTN website is not even geared up to accept the TRAN-1 Forms. At the same time, it is to be noted that the claim and utilisation of transitional credit does not require a prior permission from any authority and a mere filing of Form in TRAN-1 is sufficient.
Under these circumstances, serious concerns were expressed by the Trade & Industry and the issue also hit the headlines in the mainline media. The Government had to take note of these concerns of the Trade & Industry and do something to redress their grievance and allay their fears.
Issue of Notification No. 23/2017-Central Tax dt. 17.08.2017:
Central Government has issued this Notification intended to provide a small relief to the taxpayers in the matter of filing of GSTR-3B and TRAN-1 and also the adjustment of transitional credit. Simultaneously, a Press Note on filing of Form GSTR-3B for July, 2017 was also issued yesterday. The main features of the Notification and the snippets of the Press Note are outlined below:
A. For the registered persons who wish to claim the transitional credit:
♦ Calculate the tax payable as per the following formulae:
Tax payable = (output tax liability + tax payable under reverse charge) – (transitional credit + input tax credit availed for the month of July, 2017);
♦ Tax payable as above to be deposited in cash on or before 20th August, 2017which will be credited to the electronic cash ledger;
♦ File Form GSTR TRAN-1 (to be made available on the common portal from 21st August, 2017) before filing the Return in Form GSTR-3B;
♦ In case the tax payable as per GSTR-3B is greater than the cash amount deposited as above, then deposit the balance in cash along with interest @ 18% per annum calculated from 21st August, 2017 till the date of deposit. This amount will get credited to electronic cash ledger;
♦ File the Return in Form GSTR-3B on or before 28th August, 2017 after discharging the tax liability by debiting the electronic credit or cash ledger.
In nutshell, after computing and discharging the tax liability on or before 20th August, 2017, file GSTR TRAN-1 and GSTR-3B on or before 28th August, 2017.
B. For the registered persons who opt not to file TRAN-1 on or before 28th August, 2017:
♦ Calculate the tax payable as per the following formulae:
Tax payable = (output tax liability + tax payable under reverse charge) – input tax credit availed for the month of July, 2017;
♦ Tax payable as above to be deposited in cash on or before 20th August, 2017 which will be credited to the electronic cash ledger;
♦ File the Return in Form GSTR-3B on or before 20th August, 2017 after discharging the tax liability by debiting the electronic credit or cash ledger.
C. For other registered persons:
♦ Return in Form GSTR-3B is to be filed on or before 20th August, 2017.
While the 'gesture' from the Government is appreciable, what, on close examination of the formulae, would leave one dumbfounded is that in effect, the computation formulae, in effect, allows the utilisation of transitional credit and/or fresh credit for the payment of tax under reverse charge! This formulae is mentioned in the Press Note which in turn is displayed on the CBEC website. Has the Board lost sight of the fact that tax liability under reverse charge has to be discharged in cash only and input tax credit cannot be utilised for the same?
[Caution : Taxpayers will do well in not utilising the transitional credit/fresh credit for the payment of tax liability under reverse charge as this is expressly prohibited in law.]
It may be clarified here that it is not compulsory to claim the transitional credit available as on 1st July, 2017 in GSTR-3B and TRAN-1 for July, 2017. The registered persons who, for any reason, are not in a position to compute and claim the transitional credit at this stage, may defer the same and avail the same at a later date by filing TRAN-1 by 30th September, 2017 i.e. the prescribed due date.
A million dollar question, however, still remains whether the ITC of GST paid under reverse charge in the month of August, 2017 in respect of the supplies received in July, 2017 can be claimed and utilised for the payment of tax for July, 2017 or not.
In effect, a 'small window' (an interesting expression used in the Press Release) is provided to the taxpayers in the matter of availing transitional credit and filing of TRAN-1 and GSTR-3B for July, 2017. This last minute merciful gesture has come after Trade & Industry strongly voiced their disappointment and disbelief ! The questions here are: "Couldn't this be visualised in the beginning itself? Or is it that the authorities were too self-confident about GSTN being geared up to accept the Returns in time? And why couldn't a column be not provided in GSTR-3B for transitional credit in the first place itself?" It is also rather unfortunate that the interest is being demanded for a marginal delay in discharging the tax liability by sticking to the deadline of 20th August, 2017 when system itself is not ready necessitating frequent interventions and extensions!
Even before Notification No. 23/2017-Central Tax was released in the public domain, State Governments like Odisha and West Bengal had already issued the respective Notifications on the same lines and as has now become the norms, Press Release also preceded the issue of actual Notification!