The Goods and Services Tax GST act 2017 (GST) Act 2017 introduced an Input Tax GST act 2017Credit (ITC) mechanism allowing registered taxpayers to offset the GST paid on their purchases against the GST liability on their sales. However, discrepancies can arise between the claim of ITC by a recipient and the corresponding outward supply details declared by the supplier. GST act 2017 Rule 71 of the CGST Rules governs the communication, rectification, and, if necessary, reversal of such discrepancies.

Here’s a breakdown of the key aspects:

1. Discrepancy Identification and Communication:

• The GST system automatically GST act 2017matches ITC claims of recipients with outward supply details of suppliers for each tax period.
• Any discrepancies are electronically communicated to both the recipient (through Form GST MIS-1) and the supplier (through Form GST MIS-2) by the last day of the month in which the matching is done.

2. Rectification Mechanisms:

• Both the recipient and supplier GST act 2017have an opportunity to rectify the identified discrepancies:
  • Supplier: Can add or correct GST act 2017 details of outward supplies in their next return to match the recipient’s claim.
  • Recipient: Can delete or correct details of inward supplies in their next return to match the supplier’s declaration.

3. Reversal of Input Tax Credit:

• If the discrepancy remains unrectified by either party in the respective return for the month they received the communication, the ITC claimed by the recipient is reversed.
• The reversed amount is added to the recipient’s output tax liability in their GSTR-3 return for the following month.

Additional Points:

• The process aims to ensure GST act 2017proper utilization of ITC and prevent tax evasion.
• Timely communication and rectification are crucial to avoid ITC reversal.
• Both recipient and supplier should carefully review the discrepancy communication and take necessary action within the provided timeframe.

                                       EXAMPLE

State: Tamil Nadu (Please specify if you need another state)

Scenario:

1. Discrepancy: A registered taxpayer in Tamil Nadu, ABC Ltd., purchases raw materials GST act 2017from XYZ Enterprises, also registered in Tamil Nadu. ABC Ltd. claims ₹10,000 ITC on the purchase invoice in their GSTR-3B return. However, XYZ Enterprises accidentally reports the sale value as ₹8,000 in their GSTR-1 return.
2. Communication: The GST system GST act 2017 automatically detects the discrepancy during monthly return filing. The details of the discrepancy are electronically communicated to both ABC Ltd. (Form GST MIS-1) and XYZ Enterprises (Form GST MIS-2) on the last date of the month in which the mismatch is identified.
3. Rectification:

• Option 1: XYZ Enterprises can rectify the mistake GST act 2017 within the next month by GST act 2017filing a revised GSTR-1 with the correct sale value (₹10,000). This will automatically update the credit available to ABC Ltd. in their GSTR-2B and eliminate the discrepancy.
• Option 2: ABC Ltd. can rectify the discrepancy in their next GSTR-3B return by reducing the ITC claim to ₹8,000 to match the value reported by XYZ Enterprises.

4. Reversal: If the discrepancy remains unaddressed GST act 2017by either party for two consecutive tax periods, ABC Ltd. is obligated to reverse the excess ITC claimed (₹2,000) by adding it to their output tax liability in the GSTR-3B return for the subsequent month. They will also incur interest on the reversed amount.

Note: This is a simplified example, and the specific requirements and timelines may vary depending on the nature of the discrepancy and the state GST rules. It is always recommended to consult a qualified tax professional for guidance on handling  discrepancies and reversals of ITC under the GST Act.

                             FAQ QUESTIONS

Q: What is “discrepancy in claim of GST act 2017 input tax credit (ITC)” under GST?

A: Discrepancy arises when the details of an inward supply (goods/services received) declared by a recipient for claiming ITC do GST act 2017 not match the corresponding outward supply details declared by the supplier. This mismatch can occur due to errors in invoice details, tax rates, quantity, etc.

Q: How is discrepancy communicated under GST?

A: Discrepancy is communicated GST act 2017 electronically on the GST common portal through:

• Form GST MIS-1: Used by the recipient to inform the supplier about the discrepancy.
• Form GST MIS-2: Used by the GST system GST act 2017to automatically inform both the supplier and recipient about the discrepancy identified during return filing.

Q: What happens after receiving a discrepancy notification?

A: Both the supplier and recipient have options to reconcile the discrepancy:

• Supplier rectification: The supplier can rectify the outward supply details in their subsequent return to match the recipient’s claim.
• Recipient rectification: The recipient can GST act 2017modify their inward supply details in their next return to match the supplier’s declaration.

Q: What if the discrepancy is not rectified?

A: If the discrepancy remains unaddressed by the month following its communication, the recipient:

• Loses the ITC claimed for the unmatched amount.
• Faces an additional GST act 2017tax liability equal to the unclaimed ITC on their GSTR-3 return for the next month.

Q: How can I reverse ITC already claimed but found to be incorrect?

A: If you realize an error in your claimed ITC after filing the return, you can reverse it through:

• FORM GSTR-1: If the error is discovered within the current month.
• FORM GSTR-9: If the error is GST act 2017 discovered after the current month.

Q: Are there any penalties for not rectifying discrepancies or reversing incorrect ITC?

A: Yes, failure to rectify discrepancies or reverse incorrect ITC can attract penalties under GST law. The penalty amount depends GST act 2017on the nature and extent of the error.

Additional FAQs:

• How long do I have to rectify a discrepancy?
• What documents do I need to submit for rectification or reversal of ITC?
• Can I claim ITC on rectified invoices?
• How can I avoid discrepancies in ITC claims?

These are just some GST act 2017 common questions answered. Feel free to ask any further questions you may have about communication, rectification, or reversal of ITC under GST Act 2017.

                                      CASE LAWS

The Goods and Services Tax (GST) Act, 2017 introduced a mechanism for matching GST act 2017 the input tax credit (ITC) claimed by a recipient with the corresponding output tax liability declared by the supplier to ensure proper credit utilization and prevent tax evasion. Rule 71 of the Central Goods and Services Tax (CGST) Rules, 2017 governs the communication and rectification of discrepancies in ITC claims and its subsequent reversal if not rectified.

However, there are currently no reported case GST act 2017 laws specifically dealing with Rule 71. This is likely due to its relatively recent introduction and the fact that most discrepancies are resolved through communication and rectification between the taxpayer and the tax authorities.

However, there are various legal pronouncements and rulings related to the GST act 2017concept of ITC matching and reversal under the GST Act which can be relevant to Rule 71:

• Supreme Court in M/s. Hero MotoCorp Ltd. v. Union of India & Ors. (2020): Upheld the GST act 2017constitutional validity of Section 42 of the GST Act, which deals with ITC matching and reversal.
• Gujarat High Court in M/s. Ajanta Pharma Ltd. v. Union of India & Ors. (2019): Clarified that the time limit for communication of GST act 2017discrepancies under Rule 71 commences from the last date of the month in which the matching is conducted.
• Telangana High Court in M/s. Asian Paints Ltd. v. The Assistant Commissioner (ST) (2018): Ruled that claiming ITC GST act 2017 on invoices already reversed by the supplier is not permissible.

These pronouncements highlight the importance of accurate ITC claims and the consequences of discrepancies.

Here’s a breakdown of the key aspects of Rule 71:

• Communication of discrepancies: Any mismatch GST act 2017between the ITC claimed by a recipient and the output tax declared by the supplier is electronically communicated to both parties through forms GST MIS-1 and GST MIS-2.
• Rectification by recipient: The recipient has the opportunity to rectify the discrepancy by GST act 2017deleting or correcting the details of the inward supply to match the outward supply declared by the supplier.

Reversal of ITC: If the discrepancy GST act 2017 remains unaddressed, the excess ITC claimed is reversed and added to the recipient’s output tax liability in the next month