This circular provides clarification on how tax authorities should deal with cases where input tax credit (ITC) availed by registered persons in FORM GSTR-3B differs from the ITC reflected in FORM GSTR-2A for financial years 2017-18 and 2018-19.

It recognises that during the initial phase of GST implementation, FORM GSTR-2A was either not available or did not correctly reflect supplies due to non-filing, incorrect filing, or reporting errors by suppliers in FORM GSTR-1. As a result, genuine ITC availed by recipients in FORM GSTR-3B is being questioned during scrutiny, audit, or investigation proceedings.

The circular clarifies that such differences should not be treated as ineligible ITC outright. The proper officer is required to verify whether the substantive conditions of section 16 of the CGST Act are fulfilled, including possession of tax invoice, receipt of goods or services, and payment to the supplier. The officer must also ensure that the ITC is otherwise admissible and availed within the prescribed time limits.

For verification of tax payment by the supplier, the circular prescribes a graded mechanism. Where the ITC difference exceeds ₹5 lakh per supplier in a financial year, a certificate from a Chartered Accountant or Cost Accountant is required. Where the difference is up to ₹5 lakh, a certificate from the supplier confirming payment of tax in FORM GSTR-3B is sufficient.

These clarifications apply only to bona fide cases for FY 2017-18 and 2018-19 and are applicable to ongoing or pending proceedings. They are not intended to reopen completed cases or be used for interpretation beyond the specified period