GST UPDATE
Desk of CA. Praveen Sharma
Series- 507
Reply to the notice received for denial of ITC u/s 16(4) due to late filing of GSTR-1 by selling dealer
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We are in receipt of notice dated ......... under section 16(4) of CGST Act, 2017 for denial of ITC on the ground that the selling dealer has not filed his GSTR-1 on time as prescribed u/s 16(4) of the CGST Act, 2017
In the notice received, your honour had demanded reversal of ITC. In this connection we submit our reply as below:-
In this regard, we submit that Section 41 entitles every registered person to take the credit of eligible input tax as self-assessed in his return. Under section 41(1) every Registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his Electronic credit ledger. Under section 41(2) the credit of input tax availed by a Registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed: Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said Registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.
However, the above referred letter has stated that we are not entitled for ITC in accordance with sub-section (4) to Section 16 which reads as follows:-
“(4) A Registered person shall not be entitled to take Input tax credit in respect of any invoice or Debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or invoice relating to such Debit note pertains or furnishing of the relevant annual return, whichever is earlier.”
It is clear from the above provision that the provision of section 16(4) is applicable on the recipient of supply and not applicable on supplier.
Eligibility and conditions for taking Input tax credit is prescribed under section 16(2) as below:-
(2) Notwithstanding anything contained in this section, no Registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,—
(a) he is in possession of a tax invoice or Debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
(aa) the details of the invoice or Debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or Debit note in the manner specified under section 37;
(b) he has received the goods or services or both.
Explanation.—For the purposes of this clause, it shall be deemed that the Registered person has received the goods or, as the case may be, services—
(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such Registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;
(ii) where the services are provided by the supplier to any person on the direction of and on account of such Registered person.
(ba) the details of Input tax credit in respect of the said supply communicated to such Registered person under section 38 has not been restricted;
(c) subject to the provisions of section 41 or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of Input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in lots or instalments, the Registered person shall be entitled to take credit upon receipt of the last lot or instalment:
Provided further that where a recipient fails to pay to the supplier of goods or services or both,other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the Input tax credit availed by the recipient shall be paid by him along with interest payable under section 50, in such manner as may be prescribed: [See Rule 37]
Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon.
Clarification to deal with difference in Input tax credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19 is issued vide circular F. No. 183/15/2022-GST Dated: 27th December, 2022. In this circular a query is raised that where the supplier has failed to file FORM GSTR-1 for a Tax period but has filed the return in FORM GSTR-3B for said Tax period, due to which the supplies made in the said Tax period do not get reflected in FORM GSTR-2A of the recipients.
In reply to this query it is replied that the Proper officer shall first seek the details from the Registered person regarding all the invoices on which ITC has been availed by the Registered person in his FORM GSTR 3B but which are not reflecting in his FORM GSTR 2A. He shall then ascertain fulfillment of the following conditions of section 16 of CGST Act in respect of the Input tax credit availed on such invoices by the said registered person:
i) that he is in possession of a tax invoice or Debit note issued by the supplier or such other tax paying documents;
ii) that he has received the goods or services or both;
iii) that he has made payment for the amount towards the value of supply, along with tax payable thereon, to the supplier.
Besides, the Proper officer shall also check whether any reversal of Input tax credit is required to be made in accordance with section 17 or section 18 of CGST Act and also whether the said Input tax credit has been availed within the time period specified under sub-section (4) of section 16 of CGST Act.
In para 4.2 of this circular it is stated that for the FY 2017-18, as per proviso to section 16(4) of CGST Act, the aforesaid relaxations shall not be applicable to the claim of ITC made in the FORM GSTR-3B return filed after the due date of furnishing return for the month of September, 2018 till the due date of furnishing return for March, 2019, if supplier had not furnished details of the said supply in his FORM GSTR-1 till the due date of furnishing FORM GSTR 1 for the month of March, 2019.
It is clarified in this para that condition of filing GSTR-1 by the supplier is applicable only for the FY 2017-18, whereas our case is related to FY 2018-19.
In circular F. No. 193/05/2023-GST Dated: 17th July, 2023 clarification to deal with difference in Input tax credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01.04.2019 to 31.12.2021 is given.
In this circular following points are discussed:-
(i) Even though the availability of ITC was subjected to restrictions and conditions specified in section 16 of Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”) from 1st July, 2017 itself, restrictions regarding availment of ITC by the Registered persons up to certain specified limit beyond the ITC available as per FORM GSTR-2A were provided under rule 36(4) of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”) only with effect from 9th October 2019. W.e.f. 09.10.2019, the said rule allowed availment of Input tax credit by a Registered person in respect of invoices or Debit notes, the details of which have not been furnished by the suppliers under sub-section (1) of section 37, in FORM GSTR-1 or using the invoice furnishing facility (IFF), to the extent not exceeding 20 per cent. of the eligible credit available in respect of invoices or Debit notes the details of which have been furnished by the suppliers under sub-section (1) of section 37 of CGST Act in FORM GSTR-1 or using the IFF. The said limit was brought down to 10% w.e.f. 01.01.2020 and further reduced to 5% w.e.f. 01.01.2021. The said rule was intended to allow availment of due credit in cases where the suppliers may have delayed in furnishing the details of outward supplies. Further, w.e.f. 01.01.2022, consequent to insertion of clause (aa) to sub-section (2) of section 16 of the CGST Act, ITC can be availed only up to the extent communicated in FORM GSTR-2B.
(ii) As discussed above, rule 36(4) of CGST Rules allowed additional credit to the tune of 20%, 10% and 5%, as the case may be, during the period from 09.10.2019 to 31.12.2019, 01.01.2020 to 31.12.2020 and 01.01.2021 to 31.12.2021 respectively, subject to certain terms and conditions, in respect of invoices/supplies that were not reported by the concerned suppliers in their FORM GSTR-1 or IFF, leading to discrepancies between the amount of ITC availed by the Registered persons in their returns in FORM GSTR-3B and the amount as available in their FORM GSTR-2A. It may, however, be noted that such availment of Input tax credit was subject to the provisions of clause (c) of sub-section (2) of section 16 of the CGST Act which provides that ITC cannot be availed unless tax on the said supply has been paid by the supplier. In this context, it is mentioned that rule 36(4) of CGST Rules was a facilitative measure and availment of ITC in accordance with rule 36(4) was subject to fulfilment of conditions of section 16 of CGST Act including those of clause (c) of sub-section (2) thereof regarding payment of tax by the supplier on the said supply.
(iii) It is further clarified that consequent to insertion of clause (aa) to sub-section (2) of section 16 of the CGST Act and amendment of rule 36(4) of CGST Rules w.e.f. 01.01.2022, no ITC shall be allowed for the period 01.01.2022 onwards in respect of a supply unless the same is reported by his suppliers in their FORM GSTR-1 or using IFF and is communicated to the said Registered person in FORM GSTR-2B.
Since we have fulfilled all the conditions as mentioned in section 16 of the CGST Act, 2017, the question of reversal of ITC does not arise. As far as filing of late GSTR-1 return by the supplier, section 16(4) does not disallow claim of ITC in the hands of recipient.
It is further clarified that consequent to insertion of clause (aa) to sub-section (2) of section 16 of the CGST Act and amendment of rule 36(4) of CGST Rules w.e.f. 01.01.2022, no ITC shall be allowed for the period 01.01.2022 onwards in respect of a supply unless the same is reported by his suppliers in their FORM GSTR-1 or using IFF and is communicated to the said Registered person in FORM GSTR-2B.
Based on above submissions, we are of the view that the credit availed by us would not get restricted under section 16(4) of CGST Act, 2017. Therefore, we request your good self to drop further proceedings in this regard.
We shall be glad to provide any other information required in this regard. Kindly acknowledge the receipt of this letter and do the needful.
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CA. Praveen Sharma
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