CBIC Circular No. 211/5/2024-GST, dated June 26, 2024, provides crucial clarification on the time limit under Section 16(4) of the CGST Act, 2017, concerning input tax credit (ITC) availed by recipients on supplies received under reverse charge mechanism (RCM) from unregistered suppliers.
Issue: What will be time limit for the purpose of availment of input tax credit (ITC) by the recipient on the tax paid by him under reverse charge mechanism (RCM) in respect of supplies received from unregistered persons?
Clarification –
Take an example- Mr A received services from un-registered supplier –B during FY 2018-19 on which he is liable to pay tax under RCM but no invoice is issued as well as no tax is paid by the said recipient under RCM in respect of the same… However later on during GST Audit by the Department, the said recipient issues the invoice and pays the tax under RCM, along with interest- Now question is can he claim ITC on such tax paid now?????
Relevant provisions of the CGST ACT 2017-
- As per section 16(2) (a) of CGST Act, 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 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.
- Rule 36(1) (b) of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) prescribes that input tax credit shall be availed by a registered person inter alia on the basis of an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31 of CGST Act, subject to the payment of tax.
- So, where the supplier is unregistered and recipient is registered, and the recipient is liable to pay tax on the said supply on RCM basis, the recipient is required to issue invoice as per section 31(3)(f) of CGST Act and pay the tax in cash on the same under RCM.
- Section 16(4) CGST ACT- 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 debit note pertains or furnishing of the relevant annual return, whichever is earlier
Conclusion:
In cases of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism (RCM) and where invoice is to be issued by the recipient of the supplies in accordance with section 31(3)(f) of CGST Act, the relevant financial year for calculation of time limit for availment of input tax credit under the provisions of section 16(4) of CGST Act will be the financial year in which the invoice has been issued by the recipient under section 31(3)(f) of CGST Act, subject to payment of tax on the said supply by the recipient and fulfilment of other conditions and restrictions of section 16 and 17 of CGST Act.
Interest and penalty :
The recipient issues the invoice after the time of supply of the said supply and pays tax accordingly; he will be required to pay interest on such delayed payment of tax.
Also liable for penal action u/s 122 of CGST ACT 2017
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