Challenge The Validity of Section 16(4) of The CGST Act, When Time Extend to Claim ITC On Inward Supply Is in Force.
When the GST Commissioner, extend time limit, to furnish details of inward supply, meanwhile, he himself could restrict time limit under section 16(4), is legally valid ?
(a) Vested Rights granted to every registered person under the CGST Act , entitled to take the credit of “ ELIGIBLE” input tax ( Select and Elect manner) , as self assessed, in his return- the Provisions were prescribed in sub section (1) and (2) of Section 38 of the CGST Act – but so far, for functioning the provisions, The CGST department has not taken any steps, to facilitate and to provide, opportunity to us, on the GST Common portal, since from the date of incorporation of the Act.
(b) Rule 69 of the CGST Rules emphasis that, provisionally allowed the claim of input tax credit ON INWARD SUPPLIES including imports, allowed under section 41 shall be matched under section 42 , the supply details furnished by the supplier and the recipient, especially the GST registration number , Invoice / Credit note number and date, after the due date for furnishing the return under section 39(1), but so far, for functioning the provisions prescribed, the department has not taken any steps, to facilitate and to provide, opportunity to us, on the GST Common portal.
(c) The intention of the Legislatures that only When the entire GST Law has been functioned electronically on the GST Common portal, especially the ITC Claim provisions prescribed under section 38 and matching provisions in section 42 and 43 are functioning electronically, no doubt the time limit restrict to claim the ITC under section 16(4) will come into stand.
(d) The CGST department has totally failed to follow the provisions of first proviso to section 38, which empower to the Commissioner that he may extend the time limit, for furnishing such inward supply details only for such class of taxable persons, which is Subject to the first proviso to rule 69 of the CGST Rules read with section 42 of the CGST Act, and extend the time limit shall be reasonable one and for a class of taxable persons, not for the entire taxable persons, registered persons in India, may be Zone or States wise, depends upon the natural calamity, Covid 19 pandemic . The principles of Rule of Law laid down that the King, himself also subject to the law.
(e) When the Commissioner of this Act, invokes the First proviso to sub section (2) of the Section 38 of the CGST Act is still in action, the Provisions in sub section (4) of the Section 16 and proviso to sub section (4) of Section 16 is also legally kept in abeyance, shall be postponed till such period.
Hence in these circumstances with the following grounds we will discuss with some more sections and rules laid down under the CGST Act and Rules.
(1) Under the Value Added Tax Regime , the states were dealt only ITC Claim, by furnishing inward details to the department. Whereas Under the CENVAT Rules and Service Tax Act, the Central Government dealt only ITC Availed and Utilised, wherein, the registered persons, need not furnish in his return, any of his inward details, to department for the purpose of ITC Claim. But under the GST Act, it consists, mandatory of, Input tax credit (a) Claim (b) Availed (c ) Utilises.
(2) Only under the GST Act, the Specific provisions were prescribed, the manner of Entitled to Take the “ELIGIBLE” INPUT TAX CREDIT, in Sub section (1) of Section 38 of the CGST Act, for the purpose of, Select and Elect, to claim the ITC on Inward Supplies, furnish such details , under section 38(2) of the Act, and its total amount shall be auto generated, as “particulars” of inward supply , in the return, in form GSTR-3, prescribed under Section 39(1) of the Act, and such amount shall be credited in Electronic Credit Ledger, provisionally in Section 41(1) of the Act, subject to conditions prescribed in section 42 read with rule 69 of the CGST Rules.
(3) The Provisions in section 37, Section 38, section 39(1), 39(9), sub section (1) of section 41, Section 42 and section 43, of the CGST Act read with connected Rule made in 59, 60, 61, 69, 70-77 and 86 are expressing the fundamental Concept and the intention of the Legislatures, on ITC claim reconciliation between the supplier and recipient before furnish the return, after furnished return, subject to supply details matching, Conditions for ITC credited in the Electronic credit ledger. Since from the date of incorporation of the Act, the CGST department failed, to facilitate functioning the provisions specified, electronically on the GST common portal.
(4) Under Section 41(1) the ITC Claim amount shall be provisionally credited subject to conditions and restrictions prescribed in rule 69 of the CGST Rules.
(5) Rule 69 of the CGST Rules prescribed that, provisionally allowed the claim of input tax credit ON INWARD SUPPLIES including imports, allowed under section 41 shall be matched under section 42 , the supply details furnished by the supplier and the recipient, especially the GST registration number , Invoice / Credit note number and date, after the due date for furnishing the return under section 39(1).
(6) Sub section (1) of Section 42 of the CGST Act prescribed that the details of every INWARD SUPPLY furnished by a registered person (Recipient) for a tax period shall be matched with :-
(a) The corresponding details of OUTWARD SUPPLY furnished by the supplier;
(b) In the case of IMPORTS , the IGST paid under section 3 of the Customs tariff Act.
(7) Sub Section (2) of Section 42 of the CGST Act emphasis that the CLAIM OF ITC in respect of Invoices or Debit notes, relating to INWARD SUPPLY that match with the details of corresponding OUTWARD SUPPLY or IGST paid under section 3 of the Customs Act SHALL BE FINALLY ACCEPTED, and such acceptance shall be communicated, to the recipient, vide in rule 70 of the CGST Rules.
(8) When ITC claim discrepancies still continue , after furnished the return, the duty of the GST common portal, shall make communication to both the supplier and recipient, the provision has been prescribed in Sec.42(3).
(9) If any duplication of ITC claim, provision in section 42(4) prescribed.
(10) The burden of payment of tax and interest by the recipient has been prescribed in section 42(5) of the Act.
(11) Under the provisions of Section 39(9), if the supplier has rectified the incorrect or omission relating to ITC claim discrepancies, the recipient is eligible to reduce , from his output tax liability has been prescribed in section 42(7) , the recipient paid interest under section 42(8) shall be refunded and credited to his electronic cash ledger has been prescribed in section 42(9) of the Act.
(12) The provisions of ITC Claim matching in Section 42 read with rule 69 disclose that the ITC Claim shall be on furnish the Inward Supply details by the recipient in his return. So it is very clear that ITC Claim shall be available only when the recipient furnish his inward supply details in his return. So far, the CGST department failed, to facilitate for functioning the provisions on the GST Common portal.
(13) Sub section (1) of Section 37 of the Act prescribed that the supplier shall furnishe his details of outward supply on or before 10th day of the succeeding month of the tax period and shall be communicated to the recipient in form GSTR2-A. It means form GSTR2-A has no legal powers other than communicating details of supply from supplier to the recipient.
(14) Sub Section (1) of section 38 disclose, the purpose of, communicating the supply details furnished by the supplier, to the concerned recipient , taxable person, that “TO PREPARE”, THE DETAILS OF HIS ( RECIPIENT) INWARD SUPPLY SUPPLIES AND CREDIT OR DEBIT NOTES . ANY HE MAY INCLUDE THEREIN THE DETAILS OF INWARD SUPPLIES, CREDIT OR DEBIT NOTES RECEIVED BY HIM IN RESPECT OF SUCH SUPPLIES, THAT HAVE NOT BEEN DECLARED BY THE SUPPLIER UNDER SECTION 37(1).
(15) Thereafter, under Section 38(1), the supplier has to reconcile the supply details to avail for a tax period, if agrees, he shall verify and validate after duly confirmed such ITC claim on inward supplies, he has eligibility and conditions prescribed under this Act, for taking the ITC. In this subject matter CT Notification number 10/2017 along with form GSTR-2, instructions were notified.
(16) In case if any discrepancy on the supply details, he can make correction , for example if goods or services have not been received (goods not actual receipt) keep the transaction pending for action, if required reject , such modification shall be electronically communicated to the supplier, for either the supplier to accept or reject. The recipient after selected the details of supply, to avail for a period, he has to Elect , which is eligible to avail, as his input tax credit claim on Inward supplies, with eligibility and conditions for taking ITC, prescribed in section 16, 17 and 18 of the Act. Please refer CT Notification number 10/2017, along with form GSTR-2 instructions were notified. He shall furnish the details of his inward supplies for the purpose of ITC claim on Inward supplies under section 38(2), after 11th day but on or before the 15th of succeeding month of the tax period.
(17) The grand total amount of ITC Claim on Inward Supplies has been auto populated into his return in form GSTR-3 under section 39(1) of the Act, as particulars of inward supplies, shall be credited to his electronic credit ledger in section 41(1)provisionally, subject to section 42 and 43 of the Act, after he furnished his return electronically on the GST Common portal.
(18) The Honourable High Court of Patna, in the case of Commercial Steel Engineering Corporation Versus State of Bihar, has clarified the term ITC availed that only when the amount has been taken from the electronic credit ledger and deduct the output tax liability.
(19) The ITC Claim on details of inward supply furnished; and when credited into electronic credit ledger provisionally is called ITC Claim taken. For example against the eligibility and conditions prescribed under section 16(2)(b) read with Offence prescribed in clause (vii) of sub section (1) of Section 122 of the CGST Act.
(20) Form GSTR3-B is violating the provisions prescribed in rule 86(5) read with rule 69 and Section 41(1) of the Act that rule 86(5) prescribed that “ Save as provided in the provisions of this Chapter, NO ENTRY SHALL BE MADE DIRECTLY IN THE ELECTRONIC CREDIT LEDGER UNDER ANY CIRCUMSTANCES”. Whereas in form GSTR3-B , facilitated in table 4, if a registered taxable person what are being amount he makes manually, will be directly credited in the Electronic credit ledger.
(21) To avoid offences under Section 73,74, Section 122(1)(vii) and (ix) if the registered person himself found any discrepancies in Electronic Credit ledger, he can rectify himself by opting form GST PMT-04 prescribed in sub rule (6) of rule 86 of the CGST Rules.
(22) Finally, when the intention of the legislature has been laid down in the GST Act that ITC Claim on Inward supplies shall be furnished electronically on the GST Common portal, furnishing inward supply details, the manner of select and elect, to take the eligible ITC has been prescribed in Section 38 has been postponed by the Commissioner of CGST Act, since for the month of July 2017, hence under this circumstance, he himself could not invoke and restrict the time limit for ITC claim on Inward supply prescribed in section 16(4) of the CGST Act.
(23) The present amended rule 60 is totally violating the intention of the legislatures because, Since from the date of incorporation of the CGST Act, the GST Commissioner, implemented the first proviso to section 38(2) curtain the provisions of sub section (2) of section 3 of the Act and extending the time limit to furnish the details of inward supply is still in force, under such circumstances, prior to the substitution, the intention of the legislatures reflect in rule 60 read as under: (under the sub heading: Form and manner of furnishing details of Inward supplies).
(1) Every registered person , other than a person referred to in section 14 of the IGST Act 2017. Required to furnish the details of inward supplies of goods or services or both received during a tax period under sub section (2) of section 38, shall , on the basis of the details contained in part-A, part-B and part-C of form GSTR 2-A, prepare such details as specified in sub section (1) of the said section and furnish the same in FORM GSTR-2 electronically through the common portal, either directly or from a facilitation Centre notified by the Commissioner, after including therein details of such other inward supplies , if any, required to be furnished under sub section (2) of the Section 38.
(2) Every registered person shall furnish the details , if any, required under sub section (5) of section 38 electronically in form GSTR-2.
(3) The registered person shall specify, the inward supplies in respect of which he is not eligible, either fully or partially, for input tax credit in Form GSTR-2 where such eligibility can be determined at the invoice level.
(4) The registered person shall declare the quantum of ineligible input tax credit on inward supplies which is relatable to non-taxable supplies or for the purposes other than business and cannot be determined at the invoice level in form GSTR-2.
(4-A) The details of invoices furnished by an non-resident taxable person in the return in form GSTR-5 under rule 63 shall be made available to the recipient of credit in part-A of form GSTR2-A electronically through the common portal and the said recipient may include the same in form GSTR-2.
(8) The details of inward supply of goods or services or both furnished in form GSTR-2 shall include the-
(a) invoice wise details of all inter-state and intra state supplies received from registered persons or unregistered person;
(b) import of goods and services made ; and
(c) debit and credit notes , if any, received from supplier.
The CGST department failed to raise their voice against the violation of law, rules were made against the principles of natural justice, in this regards.
(24) The present amended rule 61 is totally violating the intention of the legislatures because, Since from the date of incorporation of the CGST Act, the GST Commissioner, implemented the first proviso to section 38(2) and curtain the provisions of sub section (2) of section 3 of the CGST Act, extending the time limit to furnish the inward supply details is still in force, under such circumstances, prior to the substitution, the intention of the legislatures reflect in rule 61 read as under: (under the sub heading: Form and manner of submission of monthly return).
(1) Every registered person , other than a person referred to in section 14 of the IGST Act 2017 or an ISD or a non-resident taxable person or a person paying tax under section 10 or section 51 or as the case maybe, under section 52 shall furnish a return specified under sub section (1) of section 39 in form GSTR-3 electronically through the common portal either directly or through Facilitation Centre notified by the Commissioner.
(2) Part A of the return under sub rule (1) shall be electronically generated on the basis of information furnished through form GSTR-1 form GSTR-2 and based on other liabilities of preceding tax periods.
(3) Every registered person furnishing the return under sub rule (1) shall subject to the provisions of section 49, discharge his liability towards tax, interest, penalty, fees or any other amount payable under the Act or the provisions of this Chapter by debiting the electronic cash ledger or electronic credit ledger and include the details in part-B of the return in Form GSTR-3.
(4) A registered person, claiming refund on any balance in the electronic cash ledger in accordance with the provisions of sub section (6) of section 49 may claim such refund in part-B of the return in Form GSTR-3 and such return shall be deemed to be an application filed under section 54.
(5) Where the time limit for furnishing of details in form GSTR-1 under section 37 and in form GSTR-2 under section 38 has been extended and the circumstances so warrant, the commissioner may by notification specify the manner and conditions subject to which the return shall be furnished in form GSTR3-B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.
(6) Where a return in form GSTR 3-B has been furnished , after the due date for furnishing of details in form GSTR-2-
(a) Part A of the return in form GSTR-3 shall be electronically generated on the basis of information furnished through form GSTR-1 and form GSTR-2 and based on other liabilities of preceding tax periods and part-B of the said return shall be electronically generated on the basis of the return in form GSTR3-B furnished in respect of the tax period;
(b) The registered person shall modify part B of the return in form GSTR-3 based on the discrepancies, if any between the return in form GSTR 3-B and the return in form GSTR-3 and discharge his tax and other liabilities, if any;
(c) Where the amount of input tax credit in form GSTR-3 exceeds the amount of input tax credit in terms of form GSTR 3-B the additional amount shall be credited to the electronic credit ledger of the registered person.
The CGST department failed to raise their voice against, the violation of law, rules were made against the principles of natural justice, in this regards ,especially amended on sub rule (6) of Rule 61.
(25) By the above we can easily to understand that for bring into function the above described fundamental provisions, the CGST department has failed totally, cause, all the tax evaders and offenders are out of the network under this Act , the exchequer facing huge volume of revenue loss since July 2017 . Facility for Claim and matching ITC on Inward supply, by furnish the details, opportunity has not been provided on the GST Common portal, due to the Commissioner invoked the first proviso to sub section (2)of Section 38. Until remove the curtain to claim ITC on Inward supply, furnish under the provisions of section 38(2) of the CGST Act, he himself or his subordinates, no one could invoke Section 16(4) of the Act.
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