© All rights reserved
Price : ` 1495
Law stated in this book is amended by the Finance Act, 2025
Published by :
Taxmann Publications (P.) Ltd.
Sales & Marketing :
59/32, New Rohtak Road, New Delhi-110 005 India
Phone : +91-11-45562222
Website : www.taxmann.com
E-mail : sales@taxmann.com
Regd. Office : 21/35, West Punjabi Bagh, New Delhi-110 026 India
Printed at :
Tan Prints (India) Pvt. Ltd.
44 Km. Mile Stone, National Highway, Rohtak Road Village Rohad, Distt. Jhajjar (Haryana) India
E-mail : sales@tanprints.com
Disclaimer
Every effort has been made to avoid errors or omissions in this publication. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that neither the publisher nor the author or seller will be responsible for any damage or loss of action to any one, of any kind, in any manner, therefrom. It is suggested that to avoid any doubt the reader should cross-check all the facts, law and contents of the publication with original Government publication or notifications.
No part of this book may be reproduced or copied in any form or by any means [graphic, electronic or mechanical, including photocopying, recording, taping, or information retrieval systems] or reproduced on any disc, tape, perforated media or other information storage device, etc., without the written permission of the publishers. Breach of this condition is liable for legal action.
For binding mistake, misprints or for missing pages, etc., the publisher’s liability is limited to replacement within seven days of purchase by similar edition. All expenses in this connection are to be borne by the purchaser. All disputes are subject to Delhi jurisdiction only.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
NOTICES UNDER SECTIONS 25 AND 29
4.1
NOTICE UNDER SECTION 73
5.8
5.9
NOTICE UNDER SECTION
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
NOTICE UNDER NEW SECTION 74A
8.1
SYSTEM GENERATED NOTICES
8.4 Rule 88D
8.5 Options for response 2
8.6 Validity of adverse inference
8.7 Presumption of arrears from turnover admitted
8.8 Service and belated response
8.9 Effective date and period of coverage
8.10 Auto-generated appropriation
REFUND NOTICE
9.1
9.2
9.3
9.4
9.5
9.6
9.7
9.8
9.9
9.10
10.5
NOTICE FOR E-WAY BILL
10.7
NOTICE FOR PENALTY
12.5
12.6
12.7
NOTICE FOR CONFISCATION
13.9
PREPARATION TO REPLY
14.1
14.2
JURISPRUDENCE OF ADJUDICATION
14.6
14.7
14.8
14.9
14.10
14.11
14.12
14.22
15.4
15.25
15.26
15.35 ‘Alternate
15.36
16
RELIEF IN ADJUDICATION
16.1
16.3
16.4 Moulding
16.5
16.6 Creature-of-statute
16.7
16.8
16.9
16.10
16.11
17
OUTCOME IN ADJUDICATION
17.1
17.3
17.5
17.6
17.7
17.9
17.10
18.1
REMEDY OF APPEAL
18.4
18.5
18.6
18.7
18.8
19.6
19.7
19.8
19.9
19.13
19.14
20
RELIEF IN APPEAL
20.1
20.2
20.3
20.4
20.5
20.6
20.7
20.9 Dismissal, if appeal
20.10
20.11
20.12
20.13
20.14
20.15
20.16
20.17
20.18
21.1
REVISIONARY PROCEEDINGS
21.7
21.8
21.9
21.10
22
APPELLATE TRIBUNAL
22.1 Relevance in replying to notices
22.2 Creatures of the statute
22.3 Structure of GSTAT
22.4 Full bench or division bench
22.5 Single member bench
22.6 Reference to third member
22.7 Appealable orders
22.8
22.9 Types of appeals
22.10
22.11
22.12
22.13
22.14
22.16
22.17
22.20
23
TRIBUNAL PROCEDURE
23.1
23.2
23.3
23.4
23.5
23.6
23.7
23.8
23.10
23.12
23.13
23.14
23.15
23.16
23.17
23.18
23.19
24.1
APPLICABLE JURISPRUDENCE
24.7
24.8
24.9
24.10
24.11
24.12
24.13
24.16
24.17 Appropriateness of forum
24.18 Understanding taxpayer’s business
24.19 Authorities that illuminate understanding
24.20 Illustrative formats
24.21 Index of decisions
DIVISION TWO PLEADINGS IN GST 25
PLEADINGS FOR REPLY TO NOTICES
25.1 Replying to notices
25.2
25.3 Burden
25.4
25.5
25.6
25.7
25.8
25.9 Departmental
25.10 Payments made via DRC-3 1
25.11 Payments made via DRC-3 2
25.12 Mismatch of GSTR-2A with GSTR-3B 1
25.13 Mismatch of GSTR-2A with GSTR-3B 2 487
25.14 Interest on belated ling of GSTR-3B
25.15 URP-RCM unpaid in 2017-18
25.16 RCM unpaid 1
25.17 RCM unpaid 2
25.18 RCM unpaid 3
25.19 Invoice of earlier tax periods included in current GSTR-3B
25.20 Tax paid in excess and adjusted
25.21 Credit notes (with GST) received 502
25.22 Credit notes (without GST) received 1 505
25.23 Credit notes (without GST) received 2 507
25.24 Debit notes issued 509
25.25 Output tax on debit notes discharged belatedly with credit 510
25.26 Credit notes issued for domestic sales 512
25.27 Credit notes issued for zero-rated supplies 514
25.28 Non-disclosure of exempt turnover 515
25.29 Mismatch of EWB and GSTR-1/3B 517
25.30 Mismatch of GSTR-1 with GSTR-3B 519
25.31 Mismatch of GSTR-7 with GSTR-1/3B 524
25.32 Mismatch of GSTR-8 with GSTR-1/3B 526
25.33 Non-reversal of common credits 528
25.34 Blocked credits availed 530
25.35 Matched credits from absconding Suppliers 532
25.36 Mismatch of TRAN-1 credit 534
25.37 Claim of TRAN-1 credit in GSTR-3B 535
25.38
25.39
25.40 Composition taxpayer with service turnover
25.41 Composition taxpayer exceeding threshold
25.42 Composition taxpayer with credit balance 542
25.43 Disposal of capital goods 543
25.44 Write-off of inputs and capital goods 544
25.45 Refund of unmatched credits to exporter 545
25.46 Credit claimed after due date 546
25.47 Credit claimed when payment not made to Suppliers 549
25.48 Output tax payable on ‘other income’ 551
25.49 Credit blocked under rule 86A 553
25.50 Output tax in cash under rule 86B
25.51 Demand for ‘interest only’ 558
25.52 Demand for ‘penalty only’ 559
25.53 Classification not correct 1 560
25.54 Classification not correct 2 562
25.55 Exemption not admissible 1 564
25.56 Exemption not admissible 2 565
25.57 Pure agency collections 567
25.58 Continuous utilization of credit 569 26
PLEADINGS IN DEPARTMENTAL ENGAGEMENT
26.1 Form for Reply 572
26.2 Accepting Liability 573
26.3 Rejecting Liability 573
26.4 Payment ‘under Protest’ 2 574
26.5 Books to be produced for Verification 574
26.6 Reply to proposed recovery in view of adverse orders passed 1 576
26.7 Reply to proposed recovery in view of adverse orders passed 2 577
26.8 Reply by third-party to DRC-13 issued against first-party 578
26.9 Objections by first-party to DRC-13 issued to third-party 578
26.10 Reply by first-party to provisional attachment in DRC-22 579
26.11 Request to keep appeal in ‘call book’ 581
26.12 Intimation of stay of Recovery after Filing Appeal 581
26.13 Intimation that notice is time-barred 582
26.14 Intimation that notice is time-barred 583
26.15 Intimation of anomalies in notice 584 27
PLEADINGS IN APPEAL MEMO
27.1 Form for communication before appellate fora 586
27.2 Belated service of impugned order passed within limitation 587
27.3 Rectification of appeal dismissed due to lapse of limitation 588
CONTENTS
27.4 Recovery after statutory appeal due to non-issuance of APL-2 590
27.5 Impugned order passed beyond limitation 591
27.6 Grounds that could ‘save the day’ 592
27.7 Relief under section 75(2) 593
27.8 Objections to provisional attachment even after initiation of due process 594
27.9 Dismissal of appeal due to payment of pre-deposit via DRC-3 597
27.10 Audit-led demand for output tax on forward charge basis 598
27.11 Audit-led demand for output tax on reverse charge basis 601
27.12 Audit-led demand for input tax credit on various grounds 603
27.13 Audit-led demand of transition credit 607
27.14 Audit-led demand common issues 1 608
27.15 Audit-led demand common issues 2 611
27.16 Audit-led demand for output tax on deemed supply 612
27.17 Audit-led demand for reversal of credit on unpaid suppliers 615
27.18 Audit-led demand for tax on supplies from unregistered suppliers 617
27.19 Audit-led demand for reversal of credit due to invoices not available for verification 619
27.20 Audit-led demand for data mismatch with GSTR-9 620
27.21 Audit-led demand for late fee 621
27.22 Audit-led demand for ‘interest only’ 622
27.23 Inquiry-led demand for differential tax on admitted turnover 623
27.24 Inquiry-led demand for output tax on ‘subsidy’ 625
27.25 Inquiry-led demand of output tax on ‘escaped turnover’ 1 627
27.26 Inquiry-led demand of output tax on ‘escaped turnover’ 2 629
27.27 Inquiry-led demand for output tax on ‘escaped turnover’ 3 631
27.28 Inquiry-led demand for reversal of credit on ‘exempt turnover’ 633
27.29 Inquiry-led demand for reversal of inadmissible credit 634
27.30 Inquiry-led demand for reversal of credit from supplierin-default 1 635
27.31 Inquiry-led demand for reversal of credit from supplierin-default 2 636
27.32 Inquiry-led demand for penalty for furnishing false documents 638
27.33 Interception-led demands (consignment) 641
27.34 Interception-led demands (conveyance) 643
27.35 Inquiry-led demand for tax allowing relief ‘selectively’ 645
27.36 Inquiry-led demand for reversal of credit due to nongenuine suppliers 646
27.37 RNV-1 issued against order of appellate authority 648
27.38 RVN-1 issued against ADT-2 653
27.39 Recovery of finalized demand after expiration of limitation to appeal 656
27.40 Affidavit accompanying application for condonation of delay 662
ANATOMY OF A NOTICE Para 5.3
something is done to avoid making such disclosure transparently. Disclosing a substitute is wilful-misstatement and not suppression.
Although the above is only a brief explanation, more extensive reading will be required to fully grasp the contours of these expressions. It would suf ce to state that the burden on Revenue to (i) identify the existence of any one of these special circumstances (ii) choose one of them (iii) collect evidence that best supports the one chosen (iv) make an election to allege (the one chosen) in the notice and (v) support said election with evidence that is clinching. Error in any of these steps will procure the remedy allowed in section 75(7) (discussed in detail later).
Examples
SCN under section 74 cannot be issued to Public Sector Undertakings as the ‘end objective’ cannot be established because any savings in tax (by evasion) will eventually belong to Consolidate Fund.
Where divergent views are expressed by different authorities (Tribunals or Courts), SCN cannot be issued under section 74. Entertaining a favourable view may be mischievous (if taxpayer does not believe in said view) but it is not so improbable (since it is shared with these authorities) to support allegation of ‘special circumstances’ to support demand under section 74. An important aspect is the ‘source’ of information to inquire and issue notice under section 74. Where taxpayer’s own contemporaneous records make up this ‘source’ with Revenue merely canvassing an alternate interpretation, it does not augur well with the allegation about the existence of ‘special circumstances’. While this is not a rule of universal applicability, information sourced from taxpayer’s own records may be compatible with bona de recording of mala de interpretation adopted. It is clear that levelling allegations about ‘special circumstances’ is not without work cut out for Revenue and one that will occupy an important part of taxpayer’s defence, where the demand is disputed.
5.3 ANATOMY OF A NOTICE
Notice under section 74 is a must not only for the additional time allowed or statutory minimum penalty applicable, when there is allegation of ‘evasion of tax’. Notice under section 74 procures jurisdiction to raise demand in ‘special circumstances’. It would be a grave contradiction that special circumstances are alleged, but notice is issued under section 73. It is also a contradiction that notice is issued under section 73 pursuant to investigation under section 67. Taxpayer is welcome to assail validity of notice due to inherent admission of ‘no evasion’ when notice is issued under section 73. And omission to issue notice under section 74 cannot be revised by section 75(2) (discussed later).
Reference to discussion under section 73 will supplement this discussion under section 74. Cause of action to issue notice under section 74 remains same as under section 73. However, “where” such cause of action arises due to ‘special circumstances’ then the notice must be issued under section 74 and NOT under section 73. To allege ‘special circumstances’ and issue notice under section 73 is contradictory, incompatible with each other and a clear misapplication of law. Section 75(2) allows relief where notice issued under section 74 but not sustained in later proceedings will be “deemed as if” the notice was issued under section 73. But the converse is not true, that is, there is no provision that ‘deems’ notice issued under section 73 to be a notice under section 74 if any of the special circumstances come to light in the course of later proceedings. In fact, there is an express embargo in section 75(7) on Adjudicating Authority and in second proviso to section 107(11) on Appellate Authority, from enhancing liability as originally proposed in notice. Notice under section 74 must be adjudicated within ve (5) years from the ‘relevant date’. Detailed discussion on ‘Limitation’ under section 73 may be considered. The table provided regarding the timelines to issue notice under section 74(2) and to complete adjudication under section 74(10), as applicable to notices under section 74 are:
Demand Notice (start date) Order (end date)
Tax not paid
Tax short paid
Credit wrongly taken
Credit wrongly utilized
Erroneous refund
54 months from due date of annual returns for FY 60 months (5 years) from due date of annual returns for FY
months from date of refund sanction
months (5 years) from date of refund sanction
NOTE: no extension of dates is noti ed under section 168A in respect of notices under section 74 for 2017-18.
Requirement of accompanying documents under rule 142(1) for notice and SOD issued under section 74 are the same in case of notice issued under section 73. But it is interesting to mention that where SOD is issued under section 74(3) in respect of a demand for a subsequent period where an earlier notice was issued under section 74, it (SOD) will be considered to be a demand under section 73 as per section 74(4). That is, SOD will always be ‘deemed’ to demand under section 73 even though it is issued with reference to notice issued earlier under section 74. All attendant relief such as that under section 73(8) and 73(11) will apply to this SOD, even though it is issued under section 74(3). Care must be taken not to overlook this signi cant difference, especially, when Adjudication Orders for the earlier
Para 5.5
notice under section 74(1) and subsequent SOD under section 74(3) may be passed in the same proceeding.
5.4 EXCEPTION TO PRE-NOTICE CONSULTATIONS
Procedure of pre-notice consultations is applicable even in respect of notices to be issued under section 74, even when ‘special circumstances’ are involved. No assumption of guilt is inherent in ‘due process’ but is an additional allegation that must be established in adjudication.
Rule 142(1A) which contained the words “Proper Of cer shall……communicate the details” noti ed from 9 Oct 2019 has been substituted with the words “Proper Of cer may……communicate the details” by an amendment from 15 Oct 2020. This amendment is in the rules and as such does not eclipse the requirement of pre-notice consultations in section 73(5) or 74(5). Situations may present themselves where taxpayers may not be traceable after committing any of the offences, especially, those punishable under section 132. While section 73(5) and 74(5) permit concessional penalty and conclusion of proceedings if the amounts speci ed are discharged on (i) own ascertainment or (ii) as ascertained by Proper Of cer, mandate to issue Form GST DRC1A in all cases would offer a defence for racketeers against notices issued without such pre-notice consultations. Such persons could evade pre-notice consultations and then claim (in later proceedings) that pre-notice consultations were bypassed by Revenue. It is for this reason, that an exception has been made effective in the rules with suf cient leeway being already available in the statute.
Another instance where pre-notice consultations is observed to be bypassed is where refund sanctioned is pending in departmental appeal and notice is issued in the meanwhile under section 73 for recovery of such refund by way of ‘dual notice procedure’ (discussed later). Where taxpayer has opposed the departmental appeal, pre-notice consultations will be empty formality and for this reason, notice will be issued in respect of erroneous refund sanctioned, whether under section 74 or section 73.
5.5 PRE-NOTICE PENALTY
Once a decision is taken by Revenue that notice merits to be issued for sufcient and defendable actionable causes under section 74, pre-notice consultations must still be carried out by issuing Form GST DRC1A as required in rule 142(1A). Although post-adjudication penalties under section 74(11) are severe, taxpayers are offered an opportunity to conclude proceedings by discharging entire amount of demand with interest and 15 per cent of demand by way of penalty. Backed by legislative wisdom, there remains nothing to debate by either side whether extent of concession allowed is fair or equitable.
All too often, it is reported that tax Of cers insist taxpayers discharge liability under section 74(5) via Form GST DRC3 with penalty of 15 per cent. Such taxpayers may be misled into believing that all further proceedings will be concluded, and when payment is made without Form GST DRC1A issued, demand can be revived by issuing notice under section 74(7) citing reasons that payment made is without discharging applicable penalty and nality to proceedings allowed in section 74(6) is not available. Taxpayers need to consider that relief under 75(2) will be available if ‘special circumstances’ involved are held unsustainable in later proceedings. These are the perils of bypassing ‘due process’ laid down by Legislature or failure to object to invalidity of proceedings and hoping truth and innocence will assure relief to taxpayers.
5.6 POST-NOTICE PENALTY
It is not uncommon for taxpayers to await and consider the grounds on which notice is issued before deciding to discharge demand. After all, notices issued with de ciencies and discrepancies are fatal to the demand. Once notice has been issued, there is a short window of thirty (30) days under section 74(8) where taxpayer is allowed yet another opportunity to discharge dues but on payment of penalty of 25 per cent of the demand (excluding interest or penalty). Below is a tabulation of the penalties applicable:
* NIL in proceedings under section 73
** 10% in proceedings under section 73
When Legislature has laid down these percentages, question whether this interferes with quasi-judicial proceeding of adjudication, is a debate that is yet to come up before Courts but is an important question that should be at least to examine of Court can impose penalty below these statutory percentages. When the overarching principle of separation of powers is accepted as superior to the requirement of uniformity in action in adjudication, it appears that these percentages are not binding on Courts. Conclusion of proceedings is contingent upon taxpayers accepting speci c penalty limits but not at the risk of forfeiting their rights in law. It appears that these limits are binding on Revenue not to demand anything more than that speci ed, provided payments are correctly made at the appropriate stage of proceeding. It must also be considered that taxpayers may consider discharging dues and penalty up to limit applicable under section 73 (at appropriate stage
Para 5.7
of proceeding) and contest the notice under section 74 seeking relief under section 75(2) (discussed later).
5.7 POST-ADJUDICATION PENALTY
Although this aspect has been discussed under section 73, it is important to address certain additional aspects that are pertinent under section 74.
As discussed earlier, notice under section 74 is not only issued due to the extended period of limitation applicable but when the demand arises in ‘special circumstances’. Notice under section 74 can be issued even within three (3) years of the ‘relevant date’. In fact, where inspection or search and seizure have been conducted, issuing notice under section 73 is a contra-indicator of the very question of jurisdiction to undertake proceedings under section 67.
Question of levy of penalty discussed under section 73 may be visited again while considering it under 74 because the language in section 74(1) reads as “….should not pay the amount speci ed in the notice along with interest payable thereon under Section 50 and a penalty equivalent to the tax speci ed in the notice.”. However, the levy of penalty when special circumstances alleged will remain under section 122(2)(b) and not under section 74(1) itself. When notice issued under section 74 has been adjudicated under section 74(9), existence of special circumstances must be considered and accepted in adjudication and the demand on rest of the merits be con rmed. When such an Adjudication Order is passed, section 74(11) allows taxpayer to discharge 50 per cent of the penalty con rmed in the Order. In other words, Adjudicating Authority is guided by the minimum amount post-notice penalty (of 25 per cent) under section 74(8) and the maximum penalty (of 100 per cent) under section 122(2)(b). Proper Of cer must adjudicate based on the facts and circumstances of each case, make a determination of the quantum of penalty without ‘acting under dictation’ in discharging quasi-judicial responsibility. And as such, this penalty may be somewhere between this minimum and maximum.
Should the taxpayer desire conclusion of proceedings, Legislature (and not Revenue) offers a revised penalty of 50 per cent of the demand and not a 50 per cent abatement of that levied in adjudication, which is illustrated below:
* if deposited within 30 days from date of communication of Order
In order to avail reduced penalty, taxpayer must discharge the demand (tax or credit or refund) with applicable interest and such penalty within thirty (30) days. All the slips in counting days must be considered. Deposit into Electronic Cash Ledger (ECL) does not suf ce unless the amount deposited is appropriated against the dues admitted.
5.8 ADDITIONAL ASPECT ABOUT EVASION
Evasion may have many facets that are alleged in notice. One important aspect is to examine if the notice admits that evasion also involves non-payment of tax which is collected or non-payment of tax but without collecting it (tax) from Customers.
Absence of allegation of non-collection of said tax from Customers is a very important aspect that assists in taxpayer’s defence. Not only will relief of cum-tax computation under rule 35 become available, but Revenue will come under ‘additional’ burden to demonstrate exactly how evasion of tax has been perpetuated because non-collection and non-payment of tax brings no gains to taxpayer. And inability to discharge this ‘additional’ burden implies taxpayers’ bona de belief in non-taxability of the transaction being admitted by Revenue. And then notice runs risk of being relegated to section 73 and demand adjusted.
Bona de belief of taxpayer in entertaining an interpretation (now assailed by Revenue as untenable and non-payment of tax alleged as deliberate) cannot be straightaway assumed to be ‘wilfully mischievous’. It is not impossible for a taxpayer to be wrong and still be bona de about such interpretation. After all, Courts too, admit that views expressed earlier may sometimes need revision when another occasion to consider the same provision presents itself again. Courts have shown by example, that it is not always mala de to have pursued a line of interpretation that is discovered (or declared by judicial authority) to be incorrect. As long as the view entertained was plausible and consequent tax treatment honestly applied with full disclosure, where required, allegation of evasion of tax cannot be easily sustained. Often divergent views emerge until they are settled by Apex Court. And adopting a view which is more favourable to taxpayer cannot be smeared with mala des automatically, and Revenue must be alert to issue notices in cases where the law is yet to be settled authoritatively and keep demands ‘alive’ by issuing notice and placing them in call-book (discussed later).
Examples
Taxpayers who had not paid RCM on ‘ocean freight’ on their own interpretation of law, which came to be settled in their favour by Apex Court in UOI v. Mohit Minerals (P) Ltd. [2022] 138 taxmann.com 331/61 GSTL 257/92 GST 101 (SC) SCN must be issued under section 73 in all cases and not under section 74.
Taxpayers have taken credit on inward supplies towards construction services citing decision in Safari Retreats (P) Ltd. v. Chief Commissioner -CGST [2019] 105 taxmann.com 324/74 GST 500/25 GSTL 341 (Ori.) even if they do not agree with it. But still, SCN cannot be sustained under section 74 since view entertained by taxpayer is supported by no less than a High Court (notwithstanding outcome on appeal to Apex Court)
And although not a proper expression to use, especially, in deliberations that younger people may read, it begs to be used (apologetically) to strongly convey the principle of law by stating ‘being stupid, is not violation of law’ That is, where ‘such’ a view is entertained by a taxpayer which no prudent person might entertain (read Bolam’s test of reasonableness) would still fail to satisfy the ‘special circumstances’ needed to support a demand under section 74.
Not every non-payment of tax is evasion of tax, much less, with mala de intent. If it can be shown that the view entertained was implausible, wild and recklessly erroneous, no demand under extended period of limitation will sustain. Intention or animus (discussed later) is baked into ‘evasion of tax’ and this requirement cannot be proved by presumption or assumed to exist in every instance where notice under section 74 is sustained.
5.9 DISPUTED TAX PERIOD
Demand for ‘ nancial year’ is out-of-fashion in GST. It is time for ‘tax period’ as de ned in section 2(106). Self-assessment is in respect of ‘each’ tax period and not a ‘ nancial year’ or any ‘block’ of tax periods. When liability of one tax period is discharged in returns of another tax period, Revenue cannot be expected to silently watch credit of the later period be utilized to discharge arrears of earlier tax period. Circular 172/4/2022-GST dated 6 Jul 2022 (at para 6) clari es utilization of balance lying in Electronic Credit Ledger (ECrL) across tax periods, whether the same is payable in self-assessment or pursuant to any proceedings in law (para 6(4)).
Role of sections 41 and 49 must be considered in harmony with each other and not in derogation of each other. Reading these two provisions, one cannot lose sight of ‘tax period’. Output tax of Tax Period 1 must be discharged out of input tax credit available in Tax Period 1 via returns led under section 39. When output tax liability of Tax Period 1 is NOT discharged via returns led under section 39, this liability may be discharged on ‘own ascertainment’ vide DRC3.
Common Portal is ‘tax period agnostic’ when permitting utilization of balance available in ECrL to via DRC3. ‘Availment and utilization’ of input tax credit was circumscribed by section 41-Old (up to 30 Sept 2022). As a result, up to 30 Sept 2022, it appears taxpayers must be mindful as to ‘identity’ of tax period and its liability. And must enquire - liability belonging ‘to which’ tax period is being discharged out of credit available ‘in which’ tax period. It seems the point is made.
Examples
Contractor collects advances in Apr 2021 of ` 100 cr. There is no credit available in Apr 2021 as all inward supplies are expected to arrive from Jun to Oct 2021. Output tax liability is settled in Nov 2021 after accumulating sufficient input tax credit, along with interest.
Event organizer collects registration fee in Jan 2022 from participants for a GST Workshop to be held in Aug 2022. Input tax credits become available from auditorium rental, travel and accommodation, AV equipment hire and other inward supplies after the event is conducted. Credit available in Aug 2022 will need to be carried forward (and utilized for next event in 2023) when output tax is fully discharge ‘in cash’ in returns filed for Jan 2022 in Feb 2022
But section 41-New (with effect from 1 Oct 2022) omits the ‘utilization’ aspect of input tax credit and concerns itself only with the ‘availment’ aspect. Entire aspect of ‘utilization’ of credit is left to section 49. Permitting utilization of credit to discharge ‘any’ tax in section 49, refers to concept of ‘one-to-one’ correlation that is not required in GST.
Example
Taxpayer has furniture business in Jaisalmer where there is accumulation of input tax credit on account of inventory build-up and investment in capital goods. This credit is permitted to be utilized to discharge output tax liability on outward supply of renting immovable property in Jaipur. Both businesses operated under common GSTIN. There is no requirement in section 49 that admissible credit of furniture business must be utilized only to discharge liability of furniture business.
Utilization of balance in ECL (Electronic Cash Ledger) and ECrL (Electronic Credit Ledger) must conform to the mandate in section 49:
Provision
Operation
S.49(1) Cash deposited to flow into ECL
S.49(2) Credit availed in 3B to flow into ECrL
S.49(3) Balance in ECL to be utilized to discharge any liability
S.49(4) Balance in ECL to be utilized to discharge output tax