Keeping in view of receiving frequent notice from GST Department regarding invalid ITC or irregular ITC for the period of FY-2017-2018 and FY-2018-2019 due to belated return filing, this article will help to the assesses and professional to reply squarely to officers.
It has been observed that the GST Department is serving notice wherein asked about the clarification of invalid ITC. They are serving notice to reverse it through DRC-03. The officers are committing error to interpret the Sec 16(4) of CGST Act 2017. In this context, I would like to submit that Section 16 of CGST Act, 2017 provides the eligibility and conditions for taking the input tax Section 16(1) reads as follows;
“16.(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”
With respect to conditions specified in sub-section (2) to Section 16, I submit that the said sub-section is beginning with a non-obstante clause to the entire Section 16 which means that the same prevails over all other sub-sections in Section 16. The conditions have been satisfied as follows;
1. Possession of tax invoice/debit note/other documents prescribed under Rule 36 of CGST Rules, 2017;
2. Received the goods or services or both;
3. The condition to track whether the tax charged in respect of the inward supply has been actually paid to Government seems impossible as there is no invoice level linkage with GSTR-3B of the supplier as it is a summary return. However, we have made payment to our suppliers in respect of which we have availed the input tax credit provisionally under Section 41;
Now I am submitting herewith the case law, wherein it will clear that the belatedly filed return are regularized when we pay proper late fees. Once the returns are accepted by the Department it means the ITC for the respective periods are allowed and it can’t be denied the officer.
Filing of return with late fees cures the defect of late filing: Once a return has been filed with a late fee, the provision of Section 16(4) should not defeat a substantial claim of ITC which is otherwise allowable under the provisions CGST Act, 2017. Though the returns are filed belatedly, the assessees can claim that they have paid late fees and by paying late fee, the delay in filing return has been regularized. The case law of Mr Rashmikant Kundalia vs Union of India 771 of 2014 (Bom.) and Howrah Taxpayers’ Association Vs. The Government of West Bengal and Anr. 2010 SCC Online Cal 2520 comes handy in such submissions. Thus, it can be contented that once the delay has been regularized, such returns have to be construed to be filed within the due date. In fact once the returns have been filed after payment of applicable late fee under Section 47 of the CGST Act, 2017, which in fact allows the taxpayer to file the returns beyond the due date; such a return should have been accepted without applying the provision of Section 16(4) of the CGST Act, 2017.
I would like to present another analysis which will clear all the doubts and validate to avail the ITC user Sec 16(4)
1. I submit that Section 41 entitles every registered person to take the credit of eligible input tax as self-assessed in his return. However, the registered person is unable to file the return under Section 39 unless they make payment of On perusal of Section 39(1) and 39(7), it is clearly evident that payment of tax is not a pre-condition for filing the return. Further, the due date for filing return and payment of tax are prescribed independently.
2. Contrary to statutory provisions, the common portal is not allowing the tax payers to file the return without making payment of tax thereby the common portal had restricted the taxpayers in filing the return without making payment of tax thereby barred the tax payers in complying with provision of Section 41 which entitles every registered person to claim ITC in the return filed under Section
3. The fact that there is no link between the payment of tax and filing of return and the common portal was not allowing the tax payers to file the returns, is also recognized by Gujarat High Court in case of Octagon Communications Pvt Limited Vs UOI 2019- TIOL-909-HC-AHM-GST (interim order).
4. In this regard, I submit that if the common portal would have allowed us to file the returns without making payment of tax which is allowed under the law, we would have filed the returns within the time limits prescribed under Section 16(4) and would have claimed the ITC as per Section 49 read with Section 41. The main reason behind failure in availing the ITC within the time limit prescribed under Section 16(4) is the common portal which had not allowed us to file our return for claiming the
5. From the above submissions, it is clear that the Central Government had not made available the facility to the tax payers to claim the ITC within the time limit prescribed under Section 16(4). Without making the IT infrastructure available to the taxpayers to comply with Section 16(4) and asking them to comply with such sub- section amounts to asking the tax payers to comply with impossible
Hence it is to inform all that when any notice is received from Department regarding invalid ITC under Sec 16(4), then you can follow this article and reply accordingly.
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