GST Circular – SOP on GST registration Cancellation for Anomalies in GSTR-3B

As per the Notification No 94/2020 – the amendment in Rule 21A of GST Rules, 2017 came to effect, which states that the GST officers can now suspend a GST Registration immediately if they found significant anomalies in GSTR3B Returns. A detailed Standard Operating Procedure (SOP) in this regard was issued by CBIC on 11th Feb 2021, vide Circular No: 145/01/2021-GST on 11th Feb 2021.

As per the above Circular, the Jurisdiction officer can suspend a GST registration if he/she finds ‘Significant Anomalies’ between the values of

  • GSTR3B Turnover Values vs GSTR1 Turnover Values as declared by the assessee
  • GSTR3B Input Tax Credit Value of the assessee vs GSTR1 Value filed by his/her suppliers

This suspension will be for 30 days and the Assessee can submit his/her reply with justifications or clarification to the Jurisdictional officer within 30 days from the date of notice.

If the jurisdiction officer satisfied with the reply of assessee then he/she can revoke suspension of GST registration.

If the Jurisdiction officer not satisfied with the reply of assessee, or the Assessee has not submitted his/her reply to the Jurisdiction officer within the prescribed time limit, then the Jurisdiction officer can process for Cancellation of the GST Registration.

The notice to the Assessee in FORM GST REGN – 31 will be generated by System & communicated to the Assessee. Till the time the facility of generating FORM GST REGN – 31 is enabled via online, as an alternative arrangement, the Jurisdiction officer can issue a Notice in FORM GST REG – 17 in the GST portal. After login this notice can be seen from “View/Notice and Order” tab.

The reply against FORM GST REG – 17 notice can be online filed by the assessee through FORM GST REG – 18 in the same portal within the specified time limit of 30 days.

What Are The Impact To The Businesses?

After filing the GSTR3B returns every month, now assesses need to check their GST Portal, periodically if any notices issued by the department. Also the Assessee need to ensure on daily basis whether his/her registration was suspended by the department.

Generally any Suspension of Registration can be done only after sending notice and hearing the clarifications from the Assessee. But according to this new SOP the officer can suspend the Registration immediately and then he/she can send the notice to get clarifications from the Assessee.

This will impact at large to the Business community, as once the Registration was suspended, the E-Way Bill portal will block generation of E-Way Bills for this GST number.

Thus, any Outward Supplies, Sales from the Assessee cannot happen.

Likewise all purchases intended to this GSTN also get stuck, as the Suppliers cannot generate E-WayBill to this GST Number because of E-Way Bill blocking.

In short, if an officer feels that there are Significant Anomalies in the GSTR3B returns value, he/she can suspend the registration immediately, and from that minute, the Assessees transactions will get affected, till he/she clarifies the query and revoke suspension.

Thus you need to ensure that all your GSTR3B returns are in compliance with the GST Act & Rules and we are not deliberately deviating the provisions. This will keep your Registration active without any obstacle.

What Are The Significant Anomalies?

As per the Circular issued by CBIC, the anomalies considered for Suspending a registration will be:

  • Our Sales Turnover &Tax liability declared in GSTR1 vs Sales Turnover & Tax liability declared in GSTR3B

And

  • Our ITC Claim declared in our GSTR3B V/S Supplier filed GSTR1 Values against our GST.

The GST Act and the Circular is quite clear, that with regard to the comparison of ITC will be based on Supplier GSTR1.

However, there are some chances that the Jurisdictional officers can interpret this Circular in a distinct manner, and compare the ITC Claim values of GSTR2B vs GSTR3B and initiate Suspension.

This will create problems for all business as they are not able to do any transactions till the time the Suspension was revoked. Also this comparison is wrong in view of the below conditions:-

  • Supplier filed his/her returns in the previous months and the Assessee Claiming ITC in current Month hence GSTR 2B and GSTR 3B for the month having difference
  • Assessee take credit for the Purchases made by him/her in previous year, claiming upto Sep GSTR3B of Subsequent Year.
  • According to the GST Act and the recent circular, if the Supplier has declared his/her sales in their GSTR1 then the Recipient Assessee can claim ITC if the same is appearing in their GSTR2A.

But if the department is not considering these above aspects and goes with GSTR2B and GSTR3B then the Assessees suffers.

What Are The Best Practice To Avoid Suspension?

In our view these points to be considered before filing GSTR3B to avoid Suspension of GST Registration under the new SOP:-

  • Download GSTR2B and check if our ITC Claim in GSTR3B is exceeding the GSTR2B value.

If it exceeds GSTR2B value then,

  • Download GSTR2A for the cumulative period (Apr 2020 to Jan 2021) and check whether all the Invoices related to our ITC Claim in GSTR3B are available in the GSTR2A report (in any of the previous months)
  • If all the Invoices are available in the GSTR3B then proceed for filing GSTR3B returns.
  • If any of the Invoices are not available either in the GSTR2B or GSTR2A in any previous months, it will be better to NOT claim the ITC in the GSTR3B.
  • The Assessee must wait till the Supplier files his/her GSTR1 and reflecting in the Assessee’s GSTR2A / GSTR2B before claiming the ITC in their GSTR3B.
  • If any of Invoices kept pending without claiming input tax credit, then you need to track those Invoices separately, month on month, to check whether the Supplier has filed their returns. If the Supplier not filed their returns, then periodical follow up with the Supplier also needed to ensure that he/she has filed their returns.

This activity requires a dedicated and routine assignment as this is quite complicated and stressful work, since the numbers and data of GSTR2A is dynamic and subject to change every day. With the above preparations, if any suspension happened immediately the Assessee can submit his/her clarifications with back up file workings and comparisons and get the suspension revoked at the earliest.

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