One of the main objectives for introduction of GST Act is to avoid the cascading effect of taxes and to ensure seamless flow of credits. The GST law contain provisions which restricts admissibility of input tax credit of goods and/or services. The admissibility including conditions for claim of ITC contained in Section 16 of the CGST Act 2017 includes time limit as well.
Provision under GST:
In terms of Section 16(4) of CGST Act, a registered person is eligible to take credit with respect to the invoice or debit note for inward supply goods or / and services, earlier of the due date for filing of GSTR 3B for the month of September for subsequent year or filing of annual return for the period to which such invoice or debit note pertains to.
Bill of Entry in case of Imports –
In case of imports, IGST will be discharged by filing bill of entry which would be the document to claim ITC of IGST paid on imports. Rule 36 of CGST Rules 2017 prescribes the documentary requirements for claiming the ITC which include the Bill of entry as one of the documents to claim the ITC.
In terms of section 2(66) of CGST Act, ‘tax invoice’ means invoice referred in section 31 of CGST Act. This section mandates issuance of invoice or a bill of supply for every supply of goods or/and service having details of description, quantity, value of supply, tax charged there on and such other particulars as may be prescribed. This section does not give reference to Bill of entry for imports.
It is relevant to note that Section 16(4) does not mention time limit applicable for availing ITC of IGST paid through bill of entry. Bill of entry is not an invoice (or) debit note for which there is a time limit. So, restriction of time limit should not be applicable in case of Bill of Entry.
Inward supply liable to GST under RCM –
In terms of Section 2(98) of CGST Act, ‘reverse charge’ means recipient is liable to pay GST on inward supply of goods or/and services as notified by government under section 9(3) or supply from unregistered person under section 9(4) of CGST Act.
In terms of section 31(3)(f) of CGST Act, registered person receiving goods or services from an unregistered person is liable to pay tax under reverse charge u/s 9(3) or u/s 9(4) and issue an invoice instead of supplier.
Section 31(3) starts with notwithstanding clause, where time limit to issue tax invoice within 30 days of provision of service is not applicable in case of inward supply, where recipient is liable to pay tax under reverse charge. Recipient issues self-invoice for payment of tax and to claim credit on such taxes paid, under section 16(2). In such case, recipient cannot be treated as supplier of goods or /and services and restriction on time limit to claim credit on taxes paid u/s 16(4) will not be applicable.
Even if restriction is applied u/s 16(4) for the time limit for availing the ITC, it shall be applicable for the year in which such invoice is raised and not from the date in which provision of inward supply of service, as GST provision does not prescribe issue self-invoice within 30 days for RCM case.
Invoice date and Time of supply –
Rule 47 of the CGST Rules prescribes the time limit for issuing the invoice for supply of services which is 30 days from the date of provision of service. Section 13 of CGST Act prescribes the time of supply in case of services which is as follows –
a. In case the invoice has been issued within 30 days from the date of provision of service then the time of supply is earlier of date of invoice or date of receipt of payment.
b. In case the invoice is not issued within 30 days from the date of provision of service, then the time of supply will be earlier of date of provision of service or date of receipt of payment.
Ex: Date of provision of service – 31/12/2019
Date of issue of invoice – 15/10/2020
Date of receipt of payment – 15/10/2020
In the above case, the time of supply u/s 13 of CGST Act is 31/12/2019 and supplier discharges the GST along with interest applicable. In such case, the question which arise is whether the time limit u/s 16(4) is applicable from the year end in which service provided i.e. 31/03/2020 or from the year end in which the invoice has been issued i.e. 31/03/2021.
In the view of author, the time limit to avail the credit should be considered based on the year to which such invoice pertains and not from the year end in which the service provided.
Tax return u/s 39 –
Another condition for claiming ITC is to file the return u/ 39 of CGST Act i.e. GSTR 3 which is not yet made applicable due to technical glitches and GSTR 3B has been introduced for time being in leu of GSTR 3 u/r 61(5). In case of “AAP & Company, Chartered Accountants v/s Union of India”, the Gujarat HC held that Form GSTR-3B is not a valid return under section 39 of CGST Act, 2017. However, the department has filed an appeal against the above referred decision in Supreme Court vide Union of India & Others Vs AAP And Co, in (2019-TIOL-543-SC-GST) which is pending as on date.
GSTR 3B has been introduced through CGST Rules, not through the sections. Rules cannot override the provisions of the act. Rules are just procedures to comply with the provision of the act. So, return inserted through rules cannot said to be valid return and which is disputable.
Notification No. 49/2019 CT dated 09/10/2019 has been issued after the decision of Gujarat HC, giving retrospective amendment to Rule 61(5) categorised Form GSTR 3B as a return u/s 39 of CGST Act. Such amendment cannot be held to be retrospective as it deprives the right entitled to the taxpayer. Retrospective amendment cannot undo a right which has already been vested with the tax payer and deny the benefit.
ITC to be allowed even if supplier failed to pay taxes to Government
As per section 16(2) of CGST Act, one of the conditions for claiming the credit by recipient is that the supplier should have actually paid such taxes collected to the government. Presently it is not possible to verify that whether supplier has paid the taxes collected by the recipient. Also there is an option to file the GSTR 3B with-out considering the details in GSTR 2A. Just because the supplier has not been paid the taxes, recipient cannot be denied to take the credit of the taxes paid.
Recently decision has been held in case of Arise India Limited and others Vs. Commissioner of Trade & Taxes, Delhi and others [TS-314-HC-2017(Del)-VAT] – wherein H’ble Supreme Court held that, the ITC shall be allowed to recipient, even though supplier has not paid tax collected from the assessee to the government, which is one of the condition to claim the credit of taxes paid on inward supply of goods or/and services under earlier regime also.
GST is a new law which is undergoing regular amendments, clarifications and different interpretations. The government and the GST council also being very pro-active in considering the requests of the tax payers. One can hope that the liberal view is adopted in ITC as it is a beneficial provision with limited restriction on claim of ITC.
Special thanks to CA Mahadev R for inputs. The author could be reached at email@example.com for any queries / feedback.