Can Input Tax Credit (ITC) for FY 2019-20 be claimed after September 2020? YES, YOU MAY

Few days ago, I came to know that Confederation of GST Professionals and Industries filed a writ petition before the Hon’ble Bombay High Court for the extension of due date of GSTR-9/GSTR-9C to 31st December 2020. The Petition stated the various problems which are being faced by professionals in view of severe restrictions on public transport and staff attendance of 10% in many places. Petition further argued that CA fraternity has heavy audit responsibilities & because of this mandate, CA fraternity has become “Corona Warriors”.

Yes, this is the fact. We all GST professionals and company people who are taking care of GST compliance are “Corona Warriors”.

This October 2020 is full of due dates under GST law. With very limited resources, limited time and family health issues, we need to observe many GST compliance. Some of them are listed in the below table:

Compliance Due Date
GSTR-1 for the month of September 2020 11th October 2020
GSTR-1 for the quarter July 2020 to September 2020 31st October 2020
GSTR-3B for the month of September 2020 20th/22nd / 24th October 2020, as the case may be
ITC-04 for the quarter July 2020 to September 2020 25th October 2020
GSTR-9 / GSTR-9C for FY 2018-19 31st October 2020

Apart from this, we all GST professionals as well as all company people who are taking care of GST compliance, are going through the pain of GSTR-2A reconciliation for the FY 2019-20. In terms of provisions of section 16(4) of the CGST Act, 2020, pending ITC related to FY 2019-20 can be claimed upto due date of GSTR-3B return for September 2020. Thus, practically speaking, the last date for claiming pending / hold ITC related to FY 2019-20 is 20th / 22nd / 24th October 2020, as the case may be.

Input Tax Credit

I guess this pain is still not sufficient. This is because as per the latest clarification issued by the CBIC vide Circular No. 142/12/2020-GST dated 9th October 2020, ITC for the months from February 2020 to August 2020, if availed as per books, is required to be reconciled with GSTR-2A in terms of rule 36(4) of CGST Rules, 2017 and excess ITC (as compared with 110% of eligible ITC reflected in GSTR-2A for February 2020 to August 2020) is required to be reversed in GSTR-3B for the month of September 2020. Moreover, separate ITC reconciliation for the month of September 2020 is to be done with GSTR-2A before filing of GSTR-3B. It is further clarified that failure to reverse excess claimed ITC for the period from February 2020 to August 2020 would be treated as “availment of ineligible ITC” which means such ineligible ITC would attract interest, if utilised against output GST liability for the respective months (i.e. from February 2020 to August 2020).

Considering the limited resources, health issues, many other restrictions due to this COVID-19 and most importantly, time constraints for availment of pending / hold ITC for the FY 2019-20, I wish to share some of the points for consideration.

While doing reconciliation of ITC with GSTR-2A, there are certain common things which are observed by all GST professionals and tax payers.  Such common observations along with few practical suggestions are mention below. This may be useful to safeguard the interest of the company:

1. ITC for FY 2019-20 is on hold because certain suppliers have reported the sale transaction under B2C instead of B2B – I personally feel that this mistake cannot restrict the company from taking ITC. This is because as per section 16(2) of the CGST Act, 2017, there are following four conditions for claiming ITC:

a. ITC is availed on the basis of valid document, which is satisfied.

b. Assessee has received the goods / services, which is satisfied.

c. The supplier has paid GST to the Government, which is satisfied; and

d. The supplier has filed GST return u/s 39 (i.e. GSTR-3B), which is also satisfied.

Since all the four conditions are satisfied, the company can very well claim ITC even if respective purchase invoice is not reflected in GSTR-2A. In such cases, I would strongly suggest that company should obtain a declaration from the respective suppliers by mentioning details of tax invoices and the fact that such tax invoices are inadvertently reported in B2C instead of B2B. This declaration would certainly be one of the strongest documentary evidence for future reference / litigation.

2. ITC for FY 2019-20 is on hold because certain suppliers have wrongly reported GSTIN of the company – even in such case, I personally feel that this mistake cannot restrict the company from taking ITC. This is because as mentioned above, all the four conditions prescribed u/s 16(2) are satisfied. Even in this case, I would suggest to obtain a declaration from the respective suppliers by mentioning details of tax invoices and the fact that wrong reporting of GSTIN of the company.

3. ITC for FY 2019-20 is on hold because certain suppliers have not filed GSTR-1 – even in such case, I personally feel that this mistake cannot restrict the company from taking ITC. This is because even though rule 36(4) of CGST Rules, 2017, restricts ITC to 110% of the eligible ITC reflected in GSTR-2A, it cannot override the provisions of section 16(2) of the CGST Act, 2017. It is settled law that the Rule cannot override the provision of the Act under which the Rule is framed. Therefore, when all the conditions are satisfied u/s 16(2) of the CGST Act, 2017, ITC should be available even though GSTR-1 is not filed. This is subject to litigation or further clarification by the Government.

4. ITC for FY 2019-20 is on hold because certain suppliers have not filed GSTR-3B – GSTR-3B not filed means GST is not paid by the supplier. Since one of the basic conditions prescribed u/s 16(2) is not satisfied, ITC is not available. However, in future, many companies will be fighting on the ground that because of default by the supplier on account of non-payment of GST, ITC should not be denied when the transaction is genuine. I heard that M/s Bharti Telemedia Ltd. has filed a writ petition before the Hon’ble Delhi High Court challenging Section 16(2)(c) [i.e. condition of payment of GST by the supplier]. This writ petition has been admitted by the Hon’ble Delhi High Court which means there is question of law involved for discussion. We are now waiting for outcome of this decision. Based on this, companies may take a call whether to recover ITC amount from the respective supplier or still avail ITC.

After considering the above situations, legal provisions and time constraints for availment of pending / hold ITC related to FY 2019-20, I wish to share one mid-way. The mid-way is to avail all pending / hold ITC for FY 2019-20 in GSTR-3B for September 2020 and reverse the same in the same month. This mid-way is based on the below legal provisions and references:

1. As per section 16(4) of the CGST Act, 2017, restriction is on availment of “fresh credit” and not on availment of “re-credit”. Therefore, once ITC is availed and subsequently reversed, it gives time to the assessee to reconcile and re-avail ITC without any time restriction;

2. As per the Press Release dated 18th October 2018, in para 4, the Government has clarified that the apprehension that input tax credit can be availed only on the basis of reconciliation of between GSTR-2A and Form GSTR-3B conducted before the due date for filing of return in Form GSTR-3B for the month of September 2018 is unfounded as the same exercise can be done thereafter also. Though this Press Release talks about ITC for FY 2017-18 but the principle remains that exercise of GSTR-2A reconciliation can be done at the later stage also;

3. There may be a situation that some of the suppliers would file GSTR-1 for FY 2019-20 after October 2020 and thus, pending ITC will be reflecting after filing of GSTR-3B for September 2020. Thus, even though the respective tax invoice will be reflected in GSTR-2A (though at later date), the same will not be eligible to claim, which is totally injustice to the taxpayer; and

4. Similar provisions regarding time limit for availment of CENVAT credit was prescribed under Rule 4(1) and 4(7) of Cenvat Credit Rules, 2004. In this connection, the CBIC had clarified vide Circular No. 990/14/2014-CX dated 19th November 2014 that time limit is not applicable in case of “re-credit” cases.

Whether this is the intention of the GST law or loophole in the GST law is the different issue however, considering the time constraint, one can consider this approach. This is just a thought after carefully going through the legal provisions of section 16 of the CGST Act, 2017 and other related provisions. I know there can be other side of thought also and therefore, it is open for discussion and arguments.

Author Bio

Qualification: LL.B / Advocate
Company: Proficient Partners Consultancy Pvt. Ltd.
Location: Pune, Maharashtra, IN
Member Since: 26 Dec 2019 | Total Posts: 2

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20 Comments

  1. Manasi says:

    Dear Sir,
    I have a Credit Note for the FY 2019-20 July month which not included in GSTR3B, so now can I take this ITC in the month of October 2020 filing of GSTR 3B

  2. Sai says:

    Can we hope about any extention and correction in gstr 3b with respect to 2019-20.
    Will government allow itc availment till 31st mar from 20th oct due date

    1. V.Gomathi. says:

      Seller have filled GST return during Sep’ 2019 and Buyer have not filled the invoice till now( Invoice left out) which have crossed one year. pl. clarify about the GST claim by the buyer now.

  3. sivasankar says:

    Dear Sirs

    19-20 bills input credit available in portal sir, but we October-20 only we received that bill, can we take that input in October month sir?? any possibility??

    Please clarify.

  4. Muhammad Mahtab says:

    Sir,
    I HAVE A DEBIT NOTE FOR THE F/Y 2019-20 FEBRUARY MONTH WHICH NOT INCLUDED IN GSTR-1, I HAVE FILED GSTR-1 FOR THE QUARTERLY UPTOJULY TO SEPT-20 THEN WHAT I SHOULD FOR ITC OF DEBIT NOTE LIABILITES. I SHOULD DO REVERSAL THAT FEBRUARY DEBIT NOTE ITC OR DRC-03 PAYMENT, CAN I TAKE THIS ITC IN ELIGIBLE ITC IN GSTR-3B COLOUM 4B OR ANY OTHER TREATMENT REQUIRE PLEASE SUGGEST NAY SOLUTION FOR THIS QUERY.

  5. Rushabh says:

    Dear Manan,

    Thanks for your clarifications but what about Section 18(2) which says we can take ITC from 1 year to invoice doesn’t it restrict us to reclaim ITC?

  6. Adv.Fasaludeen, Kerala says:

    Dear Adv. Manas Joshi. Special thanks for your studies and findings of the loop holes in the Act & Rules framed under GST Monster. Sure, your advises shall spare confidence to the tax professionals to avail all pending ITC and to over come the crisis, for the time being, The other side; the challenging one, Reversal of it in the same month- we should do it and place our arguments and facts specifically relating the particular case, well explained. Friends please try, is there any alternative way to overcome this crisis, NOW…….

  7. P Aravindhan says:

    Sir, good article, one observation:
    ITC Availment , Reversal and reavailment may be possible only under the circumstances specified in Section 16 (2) (d) of CGST Act. Whether Availment and Reversal proposed in this article, may be done under protest , under information to jurisdictional GST authority ?

  8. V.K. Verma says:

    Good one. You have rendered 2A, a waste. Even otherwise it can not be treated as tax payment proof as the same is prepared on the basis of GSTR-1 and not on GSTR-3B.

  9. Radha says:

    You have asked to reverse the credit and take re-credit. But what is the basis on which re-credit can be taken as there is no change in the circumstances. Whether the re-credit will be valid.

  10. CA Lekh Sood says:

    In my opinion, this argument of no time limit for RECREDIT may not sail through because the re-credit under section 16(3) is permitted only in a situation where the credit is reversed on account of reversal due to non-payment of consideration and GST within 180 days and permitting recredit on making the payment. When you take the credit in September 2020 and reverse in same month it nullifies the credit availed. To avail the re-credit after September 2020 one needs to substantiate the entitlement. Similarly the argument to take shelter of press release of October 2018 may not be prevent the damage because Rule 36(4) has been mandated after October,2018.

    However, one may have stronger arguments for challenging the vires of rule 36(4)- which has in fact already challenged in few High Courts. Section 43A not yet notified. Challenge section 16(4) on account of impossibility to comply with and hence bad in law.

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