Whether Section 16(4) Time Limit Applies to ITC on Import of Goods? – A Critical Analysis in Light of Recent AAR Rulings
In several cases, the GST Department has denied Input Tax Credit (ITC) on import of goods by invoking the time limit prescribed under Section 16(4) of the CGST Act, 2017. Recently, the Maharashtra Authority for Advance Ruling (AAR), in the case of M/s. Adi Enterprises [NO. GST-ARA-03/2024-25/B-212, Mumbai dated 29.04.2025], also denied ITC on import of goods on the ground that the statutory time limit under Section 16(4) had expired.
In this article, we examine an important legal question:
Does the time limit prescribed under Section 16(4) of the CGST Act apply to ITC on import of goods?
Part I – Understanding the Maharashtra AAR Ruling in Adi Enterprises
In the case of Adi Enterprises, the applicant raised the following arguments:
Applicant’s Key Contentions
1. Section 16(4) refers specifically to “any invoice or debit note.”
2. Under Rule 36(1)(d), a Bill of Entry is recognized as a separate tax-paying document.
3. Therefore, the time limit under Section 16(4) should not apply to a Bill of Entry.
4. Section 16(2)(a) permits ITC on the basis of:
-
- Tax invoice,
- Debit note, or
- “Such other tax-paying documents as may be prescribed.”
5. However, Section 16(4) restricts ITC only in respect of “invoice or debit note” and does not use the phrase “other tax-paying documents.”
-
- The applicant argued that this omission was intentional.
- Hence, Bill of Entry should be considered outside the scope of Section 16(4).
6. The principle of mutatis mutandis under Section 20 of the IGST Act cannot be used to artificially insert the words “Bill of Entry” into Section 16(4).
7. IGST on imports is levied under the Customs Tariff Act and not in the same manner as domestic supply; therefore, it should not automatically be subjected to the same time restrictions.
Department’s Stand
The Department contended:
1. Section 16(4) applies fully to IGST, including IGST paid on imports.
3. Excluding Bill of Entry from the scope of Section 16(4) would be illogical and contrary to the scheme of the Act.
4. Since the time limit had expired, ITC could not be availed.
AAR’s Analysis and Findings
The Maharashtra AAR adopted a structured reasoning approach:
1. Bill of Entry is Equivalent to a Tax Invoice
The Authority analyzed Section 31 and Rule 46, which prescribe the particulars required in a tax invoice, such as:
- Supplier details
- Recipient details
- GSTIN
- Description of goods
- Quantity
- Value
- Tax rate
- Tax amount
- Place of supply
The AAR compared these requirements with the contents of a Bill of Entry and observed that the Bill of Entry contains all essential particulars required in a tax invoice.
Conclusion:
For the purpose of Section 16(4), a Bill of Entry is to be treated as equivalent to a tax invoice.
2. Uniform Application of Section 16
Section 16 is titled “Eligibility and Conditions for taking ITC.” The AAR observed that ITC is not an absolute right but is subject to:
- Section 16(2)
- Section 16(3)
- Section 16(4)
Allowing different conditions for different documents would disturb the uniform structure of the GST law.
Hence, the time limit under Section 16(4) must apply uniformly, including to imports.
3. Harmonious Interpretation of GST Framework
The GST system operates on strict timelines:
- Return filing timelines
- Refund claim timelines
- Audit and scrutiny timelines
If ITC on import were allowed without any time limit, reconciliation and annual closure would become practically impossible.
Thus, the AAR interpreted the term “invoice” in Section 16(4) broadly to include a Bill of Entry.
Part II – Gujarat AAR Ruling in Priya Holdings Pvt Ltd
Now, attention must be drawn to another significant ruling of the Gujarat AAR in M/s. Priya Holdings Private Limited [NO. GUJ/GAAR/R/2025/34, Ahmedabad dated 06.09.2025].
In this case, the issue was whether ITC on import of goods must be reversed under the second proviso to Section 16(2) if payment to the foreign supplier is not made within 180 days.
Applicant’s Arguments in Priya Holdings
1. The foreign supplier does not charge GST.
2. IGST is paid directly by the importer to the Government at the time of import.
3. The 180-day condition under Section 16(2) is designed for domestic supplies.
4. In imports, ITC is availed on the basis of Bill of Entry, not a tax invoice issued by a registered supplier.
5. Reverse charge transactions are excluded from the 180-day rule, and import IGST is similar in nature to reverse charge.
Legal Provision – Second Proviso to Section 16(2)
It provides that where the recipient fails to pay:
“the value of supply along with tax payable thereon”
within 180 days, ITC must be reversed with interest.
In import transactions:
- The supplier receives only the value of goods.
- IGST is paid directly to the Government.
Thus, tax is not payable “to the supplier.”
Gujarat AAR’s Conclusion
The Gujarat AAR held:
- The 180-day condition does not apply to imports.
- Since IGST is already paid to the Government, the mischief sought to be prevented does not arise.
- Therefore, ITC need not be reversed even if payment to the foreign supplier is made after 180 days (subject to FEMA compliance).
My Considered View
If the second proviso to Section 16(2) does not apply to import transactions because imports are structurally distinct from domestic supplies, then logically, the same reasoning should extend to Section 16(4).
The Act and Rules cannot adopt inconsistent approaches for the same category of transaction.
If imports are:
- Distinct for the purpose of 180-day payment condition,
- Based on Bill of Entry rather than tax invoice,
- Governed by customs levy mechanisms,
then a consistent interpretation would require examining whether Section 16(4) should also be treated differently for imports.
The principle of legislative consistency and harmonious construction demands that similar transactions should not be subjected to conflicting interpretations under the same statutory framework.
Conclusion
The debate on applicability of Section 16(4) to ITC on import of goods is far from settled. While Maharashtra AAR has adopted a strict and uniform interpretation, the reasoning adopted by Gujarat AAR in Priya Holdings opens a broader interpretational space.
It is hoped that in the coming years, Advance Ruling Authorities, Appellate Authorities, Tribunals, High Courts, and eventually the Hon’ble Supreme Court will provide authoritative clarity on this issue, taking into consideration the structural and legal distinction between domestic supplies and imports under the GST regime.
Author Bio
