The concept of Matching forms the backbone of ITC (Input Tax Credit) under the GST regime. As per the concept, ITC of the recipient for inward supply to be accepted only if the corresponding outward supply of supplier stated in the return is matched with the inward supply of purchaser.

Section 42 of the CGST Act prescribed the procedure for matching the outwards liability & Input Tax Credit through filing of GSTR 1, GSTR 2 & GSTR 3. As per the Section 42 of the CGST Act, the details of every inward supply furnished in GSTR 2 shall be matched with corresponding details of outward supply furnished in GSTR 1 of the corresponding supplier.

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Statutory provision – Matching, reversal, and reclaim of Input Tax Credit

The matching concept as provided in section 42 & 43 is suspended in the absence of GSTR 2 & GSTR 3

Statutory provision – Matching, reversal, and reclaim of Input Tax Credit

According to Section 42(1) of the CGST Act, the details of every inward supply furnished by the recipient for a tax period shall be matched with the followings:

  1. The corresponding details of outward supply furnished by the corresponding supplier in his valid return for the same tax period or any preceding tax period.
  2. The IGST paid in respect of goods imported by him, and
  3. Duplication of claims of the input tax credit.

The matching concept as provided in section 42 & 43 is suspended in the absence of GSTR 2 & GSTR 3

  • A new section 43 has introduced vide CGST Amendment Act, 2018 which is a non- obstante clause and override the provisions as provided in section 16(2), 37, 38, 39(1), 41, 42 & 43.
  • Statutory provision:
    • According to section 43A(1), notwithstanding anything contained in section 16(2), section 37 or section 38, every registered person shall in the returns furnished under section 39(1) (GSTR 3B) verify, validate, modify or delete the details of supplies furnished by the suppliers.
    • According to section 43A(2), notwithstanding anything contained in section 41, section 42 or section 43 the procedure for availing of the input tax credit by the recipient and verification thereof shall be such as may be prescribed.
    • Section 43A begins with a ‘notwithstanding’ clause. This means that provisions of section 43A will override section 16(2) of the CGST Act (which states conditions for availing ITC) section 37 of the CGST Act (which deals with details of outward supplies) section 38 of CGST Act (which deals with details of inward supplies).
  • Procedure for furnishing return and availing input tax credit:
    Section 43A states the procedure for furnishing return and availing input tax credit.
  • Statutory provisions:
    • According to section 43A(3), the procedure for furnishing the details of outward supplies by the supplier on the common portal (GSTR 1) for the purpose of availing input tax credit by the recipient shall be such as may be prescribed.
    • According to section 43A(5), the amount of tax specified in the outward supplies for which the details have been furnished by the supplier in GSTR 1 under section 43A(3) shall be deemed to be the tax payable by him under the provisions of the Act.
    • According to section 43A(4), the procedure for availing Input Tax Credit (ITC) in respect of outward supplies not furnished in GSTR 1 shall be such as may be prescribed and such procedure may include maximum amount of ITC which can be so availed, not exceeding twenty percent of the input tax credit available, on the basis of details furnished by the suppliers under the said sub- section.
  • Liability to pay for Non- compliances of section 43A(6):
    • The supplier and the recipient of supply shall be jointly and severally liable to pay tax or to pay the input tax credit availed in relation to outward supplies for which the details have been furnished in GSTR 1 but return thereof has not been furnished.
    • According to section 43A(7), the recovery shall be made in such a manner as may be prescribed and such procedure may provide for non- recovery of an amount of tax or input tax credit wrongly availed. However, if the amount involved does not exceed ₹1000 the recovery proceedings can be waived off.
    • According to section 43A(8), a registered person has defaulted in payment of tax and where such default has continued for more than two months from the due date of payment of such defaulted amount. A registered person can furnish details of outward supplies within six months of taking registration.
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