20.12.2021- GSTR-3B cannot be replaced by GSTR-3 for the period of its application: Supreme Court

GSTR-3B cannot be replaced by GSTR-3 for the period of its application: Supreme Court.

Key Insights:- With the quashing of the Gujarat High court order by supreme court,  the assesse can make an inference as-

  1. GSTR-3B is stop gap arrangement& equally a valid return.
  2. GSTR-3 would NOT be required to file for the period for which GSTR-3B has been filed.
  3. Being a valid return, GSTR-3B cannot be rectified but correction can only be made at the initial stage of Forms GSTR-1 and GSTR-3B but in the specified manner in Circular no. 26/2017.
  4. Payment of tax in GSTR-3B either by cash or credit is valid unless it violates any provision of law.
  5. ITC availed in GSTR-3B would be treated as availment on self-assessment basis & valid for the purpose of payment of tax.
  6. Any ITC availed in GSTR-3B would require to comply with all the necessary eligibility conditions.
  7. The restriction of availing the ITC till the due date of GSTR-3B of September of the following year or date of filing of annual return, whichever is earlier is valid & due care need to taken by assesse.
  8. Any rectification in law with retrospective enactment is equally valid.

Background:- With the Special Civil Application no. 18962 of 2018 by AAP & Co. with H’onble Gujarat High court, an interpretational issue came in front of the judiciary that whether the GSTR-3B filed u/s 39 read with Rule 61 (as amended) is also a return or not. The application is filed challenging the press release dated 18/10/2018 which clarified that input tax credit (ITC) for invoices issued during July 2017 to March 2018 can be availed until last date of filing Form GSTR-3B for September 2018, i.e., until 20-10-2018. Applicant submitted that clarification is contrary to section 16(4), as return prescribed under section 39 is a return required to be furnished in Form GSTR-3 and not Form GSTR-3B.

The hon’ble high court in its judgement said that the aforesaid press release dated 18-10-2018 is valid and in consonance with section 16(4) only if Form GSTR-3B is a return required to be filed under section 39. It would also be apposite to point out that the Notification No.10/2017 Central Tax dated 28-6-2017 which introduced mandatory filing of the return in Form GSTR-3B stated that it is a return in lieu of Form GSTR-3. However, the Government, on realising its mistake that the return in Form GSTR-3B is not intended to be in lieu of Form GSTR-3, rectified its mistake retrospectively vide Notification No.17/2017 Central Tax dated 27-7-2017 and omitted the reference to return in Form GSTR-3B being return in lieu of Form GSTR-3. The impugned press release dated 18-10-2018 could be said to be illegal to the extent that its para-3 purports to clarify that the last date for availing input tax credit relating to the invoices issued during the period from July 2017 to March 2018 is the last date for the filing of return in Form GSTR-3B.

Intermittent:-The said order is being challenged by the Union of India in the apex court with a civil appeal no. 5978 of 2021. Before being heard on this appeal, another civil appeal no. 6520 of 2021 titled Union of India v. BhartiAirtel ltd. has been allowed by the apex court. While deciding this case, the three bench judgement states as- In that, allowing filing of return in Form-GSTR-3B albeit a stop gap arrangement, is ascribable to section 39 of the 2017 Act read with Rule 61 of the 2017 Rules. Indeed, it is not comparable to the mechanism specified for electronically generated Form GSTR-3 referable to Rule 61. Nevertheless, Form GSTR-3B is prescribed as a “return” to be furnished by the registered person and by the subsequent amendment of Rule 61(5) brought into force with effect from 1-1-2017, it has been clarified that such person need not furnish return in Form GSTR-3 later on. Notably, the validity of that amendment including that of Notification dated 9-10-2019 bearing No. 49/2019, is not put in issue before us. No doubt, in the initial stages, it was notified that Form GSTR-3B will be in lieu of Form GSTR-3 but that was soon corrected by deletion of that expression. At the same time, as the mechanism for furnishing return in terms of sections 37 and 38 was not operationalized during the relevant period (July to September 2017) and became operational only later, the efficacy of Form GSTR-3B being a stop gap arrangement for furnishing of return, as was required under section 39 read with Rule 61, would not stand whittled down in any manner. It would still be considered as a return for all purposes though filled manually electronically.

Ending note:-Relying upon the three bench judgement of BhartiAirtel, the order of Gujarat high court in case of AAP & Co. has been overruled & disposed of. Therefore, limitations of availing the ITC till the due date of GSTR-3B for the month September of following year is valid, as GSTR-3B is a valid return retrospectively from 01/07/2017.

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