Analysis Of Circular No. 160/16/2021-GST: Clarification In Respect Of Section 16(4) For Debit Notes, Carrying Physical Copy Of E-Invoice During Transportation & Refund Of Gst On Goods Where Export Duty Is Applicable

1. SECTION 16(4) FOR DEBIT NOTES:

1. From 1.1.2021, where for Debit Notes ITC can be availed by 30th September of the next FY by the counterparty. Which of the following dates are relevant to determine the ‘financial year’ for the purpose of section 16(4):

(a) date of issuance of debit note, or

(b) date of issuance of underlying invoice.

Answer: w.e.f. 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act.

While this was clear from the very reading of the amendment, yet a circular is welcome.

GST Goods And Services Tax - Notebook with laptop and smartphone on wooden table

2. Whether any availment of input tax credit, on or after 01.01.2021, in respect of debit notes issued either prior to or after 01.01.2021, will be governed by the provisions of the amended section 16(4), or the amended provision will be applicable only in respect of the debit notes issued after 01.01.2021?

Answer: The availment of ITC on debit notes in respect of amended provision shall be applicable from 01.01.2021. Accordingly, for availment of ITC on or after 01.01.2021, one has to only see the date of issue of the debit note.

For Debit Note issued after 01.01.2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4). For Debot note issued prior to 01.01.2021, the provisions of section 16(4), as it existed before the said amendment on 01.01.2021.

While this was clear from the very reading of the amendment, yet a circular is welcome.

Comments: The benefit of the above can be taken by those taxpayers who have charged GST inadequately or not charged GST at all in the past. Now the recipients can take the credit of such GST charged by suppliers even at a later date.

II. CARRYING PHYSICAL COPY OF E-INVOICE DURING TRANSPORTATION:

3. Whether carrying physical copy of invoice is compulsory during movement of goods in cases where suppliers have issued invoices in the manner prescribed under rule 48 (4) of the CGST Rules, 2017 (i.e. in cases of e-invoice)

Answer: There is no need to carry the physical copy of tax invoice in cases where an e-invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules and production of the Quick Response (QR) code having an embedded Invoice Reference Number (IRN) electronically, for verification by the proper officer.

Comments: This clarification would help the mobile squads to take the right decisions and prevent frivolous litigation

III. REFUND OF GST ON GOODS WHERE EXPORT DUTY IS APPLICABLE:

4. Whether the first proviso to section 54(3) of CGST / SGST Act, prohibiting refund of unutilized ITC is applicable in case of exports of goods which are having NIL rate of export duty.

Answer: Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) from availment of refund of accumulated ITC. Goods, which are not subject to any export duty and in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3) of the CGST Act for the purpose of availment of refund of accumulated ITC.

Comments: This clarification would help the field formations to take the right decisions and prevent frivolous litigation. The analogy would be useful in other cases also. Charging NIL rate of duty or exemption from duty is as good as ‘non-applicability’ of duty.

Author Bio

Qualification: LL.B / Advocate
Company: Tax Connect Advisory Services LLP
Location: MUMBAI, Maharashtra, IN
Member Since: 10 Jan 2019 | Total Posts: 56
Mr. Vivek Jalan is a Fellow Member of the Institute Of Chartered Accountants of India (ICAI) & a qualified LL.B. He is the member of The CII- Economic Affairs & Taxation Committee. He is the Co Chairman of The Indirect Tax Committee of The Bengal Chamber of Commerce and Industry. He is also View Full Profile

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