Restriction u/s 16(4) of CGST Act applicable on services received under RCM also

[Tanmay Bhardwaj]

Dear Experts

I received legal services in February 2018 on which i was liable to discharge GST under RCM mechanism. However i made payment to such service in October 2018. My question is whether restriction u/s 16(4) of the CGST Act, 2017 would be applicable in this and accordingly, i would not be able to avail ITC of GST paid on such service?

Regards

Tanmay

[Rajagopalan Ranganathan]

Sir,

Section 16 (4) of CGST Act, 2017 provides that " 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 due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier."

This section do not distinguish between tax paid in normal mode and tax paid under RCM unlike second proviso to Section 16 (2) (d). Therefore in my opinion you are debarred from taking credit on or after October 2018 in respect of the invoice issued in February 2018.

However I require clarification from you on the point that you should have to pay the tax under RCM on or before 20.03.2018 in respect of the invoice issued in February 2018. When did you pay the tax under RCM. If it is after 20.03.2018 then you should have paid the interest thereon for delayed payment.

AI Summary

Input Tax Credit cut-off applies to services under reverse charge, barring credit after the prescribed return deadline.
Restriction under Section 16(4) bars input tax credit after the earlier of the September return deadline following the financial year or the filing of the annual return, and this cut-off applies equally to supplies for which tax is discharged by the recipient under the reverse charge mechanism. If tax under reverse charge was paid after the date on which it was due, interest may be payable for the delayed payment, so the actual payment date under RCM is consequential.