Introduction
We all know that benefits come with conditions. GST law was introduced in July 2017. One of the major reasons for introducing GST was to stop cascading effect of taxes and ensure seamless flow of credit. However, the reality is that such seamless flow of credit is subject to various restrictions and conditions which technically doesn’t make the flow of credit seamless. One such condition for the purpose of availment of credit is provided in section 16(4) of the CGST Act, 2017 which states that credit of input tax should be availed within 30th November of the subsequent financial year or date of furnishing of annual return, whichever is earlier. There could be many cases where input tax credit is reversed post availment (invoice not received, goods/service not received, doubt on eligibility, etc.) however, there is lack of clarity in terms of the restriction for re-availment of such credit. In this article, the author has tried to analyse whether re-availing such reversed credit is possible even after 30th November of the subsequent financial year.
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What is re-avail?
The term ‘re-avail’ is not defined in the GST law. Hence, we refer to dictionary meaning to understand the meaning of ‘re-avail’ [Star Paper Mills Ltd vs C.C.Ex. (1989 (43) E.L.T. 178 (S.C.)].
The dictionary meaning of ‘re-avail’ is as follows:
- Collins Dictionary: to avail (someone or something) again
- com: to avail again
Hence, in the present context, the process of re-claiming input tax credit in GSTR-3B is said to be re-availment. This is also supported by the language of Rule 37A of the CGST Rules, 2017. The relevant extract is as follows:
Provided further that where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the said registered person may re-avail the amount of such credit in the return in FORM GSTR-3B for a tax period thereafter.
Whether GST law specifically allows for re-availment?
There is no specific restriction under the GST law on re-availment of input tax credit. There are specific scenarios where the law allows re-availment of credit. Such scenario are as follows:
- Rule 37: Where payment to vendor is not made within 180 days, then reversal of ITC along with interest is required to be done. However, once payment is made post 180 days, credit could be re-availed in GSTR-3B.
- Rule 37A: If credit is availed based on GSTR-2B however, GSTR-3B is not filed till 30th September of the subsequent financial year, such credit to be reversed before 30th However, where the supplier files his GSTR-3B subsequently, then credit could be re-availed in GSTR-3B.
There is no provision in the law which restricts re-availment in other cases.
Further, based on the present disclosure requirements in GSTR-3B (circular 170/02/2022-GST), entire ITC as appearing in GSTR-2B should be availed in table 4(A)(5) and reversals should be done in table 4(B)(1) – permanent and table 4(B)(2) – temporary. The ITC reversed temporarily in table 4(B)(2) could be reavailed subsequently. The reasons for temporary reversals could be:
- Invoice copy not available but appearing in GSTR-2B
- Goods/services not received but invoice appearing in GSTR-2B
- Eligibility of the credit is not certain
Therefore, a taxpayer may re-avail credit in the absence of any specific restriction and also taking cue from the circular 170 of 2022.
Legal provision on time limit for taking ITC – Section 16(4) of CGST Act, 2017
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Whether section 16(4) is applicable for re-availment?
♦ Rule 37 provides that ITC can be re-availed anytime
Rule 37(4) states that the time limit specified in section 16(4) shall not apply to a claim for re-availing of any credit, that had been reversed earlier. Extract of the said rule is as follows:
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or the provisions of this Chapter, that had been reversed earlier.
The sub-rule clearly mentions that section 16(4) will not be applicable for re-availing any credit which was reversed earlier. Hence, in the view of the author, any credit which has been reversed, could be re-availed anytime and section 16(4) of the CGST Act, 2017 will not apply.
However, it is important to note that Rule 37 draws its powers from second and third proviso of Section 16 of the CGST Act, 2017. Therefore, it could be said that time-limit relaxation is applicable only to the situation contemplated in the second and third proviso to Section 16 and not to all re-availment under the CGST Act. Consequently, all other re-availment to be government by Section 16(4) of the CGST Act, 2017.
However, in the view of author, the language of Rule 37(4) clearly mentions that the time limit of section 16(4) would not apply for reavailing any credit. Hence any credit reversed earlier could be re-availed without any time limit.
♦ No time limit provided for re-availment in Section 16 of the CGST Act
Section 16(4) provides that credit should not be taken after 30th November of the subsequent financial year or date of furnishing of annual return, whichever is earlier.
A view is possible that once credit is taken in GSTR-3B within 30th November of the subsequent financial year, section 16(4) is fulfilled and satisfied. Hence, any re-availment of such credit, if reversed, would not be governed by the provisions of section 16(4).
Section 16 and 17 does not provide any time limit for re-availment of credit. The law is silent on whether or not there is any time limit for re-availing any credit. It is well settled principle that Addition of words to fill in a gap or lacuna is not permissible. Similarly held in the case of Star Industries [2014 (312) E.L.T. 209 (Tri. – Mumbai)] which was affirmed by the Supreme Court in 2015 (324) E.L.T. 656 (S.C.).
In the case of Bombay Machinery Store [2020 (36) G.S.T.L. 161 (S.C.)], it was held that tax Administration cannot interpret legislative provisions based on their own perception of trade practise. They cannot supply words to legislative provisions to cure omissions of legislature.
In the case of B.C. Srinivasa Setty [Appeal (civil) 2335 of 2003], it was held that in the absence of any computation mechanism provided in the provision, it must be regarded as that there was no intention to levy any tax. On applying the same analogy here, in the absence of any time limit provided in the GST law for re-availment of credit, it could be said that there is no time limit for the same.
Therefore, in the view of the author, if the law does not provide any specific time limit for re-availment of credit, the department/courts cannot add words to cure such omission.
♦ Time limit applicable only for availment for the first time
It could be said that once eligible credit is availed after fulfilment of restrictions and conditions as provided in section 16, then such credit need not undergo the test of eligibility of section 16 again at the time of re-availment.
Practically, credit is availed in table 4(A) and reversed in table 4(B). Further, if credit is re-availed, the same is re-availed in table 4(A). Hence, the question arises whether section 16(4) is applicable only for taking the credit 1st time or even for re-availment.
In the case of Continental Engines Pvt Ltd [2020 (35) G.S.T.L. 402 (Tri. – Del.)], it was held that limitation period of one year prescribed under third proviso to Rule 4(1) of Cenvat Credit Rules, 2004 not applicable for taking of credit which was initially short availed due to clerical error but availed later on after rectifying mistake particularly when initial taking of credit was within stipulated time. Similarly held in the case of Gyan Packaging India (P) Ltd [2007 (218) E.L.T. 255 (Tri. – Del.)].
Therefore, re-availment of eligible credit can be done anytime.
♦ GST Section 16(2) overrides Section 16(4)
With respect to conditions specified in Section 16(2), 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. Hence, it could contend that Section 16(4), which specifies a timeframe for ITC claims, becomes redundant in light of the precedence set by Section 16(2). Consequently, ITC could be availed/re-availed without any time limit.
In the case of Emcure Pharmaceuticals Ltd [2008 (225) E.L.T. 513 (Tri. – Mumbai)], it was held that ‘Non-obstante clause’ in a statute is a legislative device usually employed to give overriding effect to certain provisions over some contrary provisions that may be found in the same enactment or some other enactment and not all the provisions contained therein. Similarly held in the case of Tirupati Udyog Ltd. [2011 (272) E.L.T. 209 (A.P.)] which was maintained by the Supreme Court in the case of Union of India v. Almag Mktg. (India) Pvt. Ltd. – 2017 (354) E.L.T. A105 (S.C.)].
However, it is well settled principle that law should not be interpreted in such a way to make any part of statute redundant and the above interpretation would lead to redundancy of section 16(4) of the CGST Act, 2017. Hence, in the author’s view, this view may not get validation in the court of law.
Conclusion
The GST law clearly provide the time limit for availment of credit i.e., 30th November of the subsequent financial year. However, where the credit is re-availed post reversal, then the taxpayer needs to take safeguards in the absence of any judicial clarity under GST law. However, in the view of the author, there is no time limit for re-availment of eligible credit as long as the first availment was within the time limit as prescribed under section 16(4) of the CGST Act, 2017.
In case of any clarifications/doubts, the author may be reached at [email protected].
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