Provisional ITC and Matching Concept under Section 41 of CGST Act, 2017 is now overruled w.e.f. 01.10.2022
Please note that section 41 of Central Goods and Services Tax Act, 2017 (CGST Act, 2017) has been fully substituted through Finance Act, 2022. With the amendment by Finance Act, 2022 ‘Provisional ITC and Matching Concept’ has been scrapped. Section 106 of the Finance Act, 2022 provides that-
For section 41 of the Central Goods and Services Tax Act, the following section shall be substituted, namely:––
“41. Availment of input tax credit.
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.
(2) The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed:
Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.”.
The CBIC vide Notification No. 18/2022–Central Tax dated 28th September, 2022 notified the above-mentioned amendment made vide Section 100 of the Finance Act, 2022 w.e.f. 1st Day of October, 2022.
It is pertinent to mention that section 41 of the CGST Act, 2017 provided that the ITC claimed by a taxpayer in GSTR 3B shall be provisional, until it is matched and finalised as per provision of section 42 & 43 and corresponding rules. However, this mechanism could never be implemented as GSTR 2 return was never filed.
Now this entire concept is being scrapped by substituting section 41 and section 42 43 & 43A being omitted. The new section 41 provides that the taxpayer shall self-assess and claim ITC in GSTR 3B. It further provides that in case the taxpayer has claimed ITC of GST which is not paid/ deposited by the corresponding supplier, than the taxpayer / recipient shall reverse the ITC along with interest. The recipient shall be eligible to re-claim the ITC reversed, on payment of GST by the supplier.
Before the amendment by Finance Act, 2022 i.e., 01.10.2022, section 41 of the CGST Act, 2017 provided that the ITC claimed by a taxpayer in GSTR 3B shall be provisional, until it is matched and finalised as per provision of section 42 & 43 and corresponding rules. However, this mechanism could never be implemented as GSTR 2 return was never filed. Prior to substitution by Finance Act, 2022, Section 41 read as under-
“41. Claim of input tax credit and provisional acceptance thereof
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on provisional basis to his electronic credit ledger.
(2) The credit referred to in sub-section (1) shall be utilised only for payment of self-assessed output tax as per the return to in the said sub-section.”
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