debit note etc gst

[Madhavan iyengar]

A Company has sold some material in July 17 and August 17 and disclosed in returns and paid the tax

Now in May 19 due to some rate increase given effect to between both buyer and seller for period july 17 and august 17 debit note will be raised by supplier in may 19 with gst. and disclose in returns and pay the tax.

query

a) is interest to be paid on the tax portion by supplier on this debit note since this fact has been decided in may 19 can it be contested that date when it is effective for liability is may 19 though for past period given effect now.

b) will interest on tax payable if recovered from supplier be liable for gst and can recipient avail the ITC

b) can debit note be raised in may 19 for july/aug 17 supplies and can recipient avail the itc in may 19

[Spudarjunan S]

Dear Sir,

Q1. Can I issue a debit note in May 2019 for invoice pertaining to F.Y 2017-18:- CAN ISSUE

Reply:- There is no time limit prescribed in the Act for issuing debit note.(Time limit is prescribed only for issuance of credit note u/s 34 of CGST Act) You can issue a debit note in May 2019 for invoice pertaining to F.Y 2017-18

Q.2 Can the recipient avail the Input Tax Credit(ITC):- (CANNOT AVAIL ITC)

Reply:- For availment of ITC, time limit has been prescribed under the law vide section 16(4) of CGST Act extract of which is provided below:-

"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."

However, for F.Y 2017-18 the time limit for availment of ITC been extended vide RoD no.02/2018 - central tax dated 31st December 2018 till due date of filing March 2019 returns subject to conditions that the details of the transactions has been uploaded by the supplier in his GSTR-1. Being the time limit expired, the ITC cannot be availed by recipient.

Summarising the reply for Q.1 & Q.2 the supplier can issue debit for an invoice whenever he wants but the recipient can avail the ITC only till the time limit prescribed u/s 16(4) of CGST Act.

Q.3 Would interest be applicable for liability arising through issuance of debit note:- (NO INTEREST)

Reply:- In terms of Section 12 & 13 of CGST Act - "time of supply" the Explanation 1 provides that “supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment"

Since the time of supply covers only to the extent covered vide invoice, the value of debit note may not be linked to the time of supply of original invoice for the purpose of interest calculation as the liability arises when the debit note issued. In your case the liability pertains to May 2019 and you required to pay interest only when you delay in making payment within the due date of May 2019.

Note:- There is no time of supply prescribed for debit note - we can treat the debit note as invoice for the purpose of ariving time of supply. However, this treatment may not hold good when there is a different rate of tax as on the date of issuance of invoice and issuance of debit. In that case as per the logic the rate of tax has to be determined as per the date of original invoice.

[Madhavan iyengar]

sir thanks for your detailed reply

why should recipient be denied ITC credit, if for purpose of interest payment the date of issue of debit note is treated as fresh supply in may 19 ( being only taxable value increase due to piece rate increase of product ( not GST rate) ) kindly give your views as you have pointed out in (b) that ITC will not be available as per sec 16(4)

[Spudarjunan S]

Dear Sir,

ITC becomes ineligible to avail because of the wordings used in the section 16(4) which I had made bold in the original reply. Where it says the time limit will calculated based on the Invoice date for availing the credit in relation to such invoices. For debit notes it will take the time limit of original invoice against which the debit note being issued for calculating the time limit where in your case the original invoice pertains to 17-18 and the time limit for availing ITC for F.Y 17-18 has been expired by the due date of filing returns for the month March 2019.

[KASTURI SETHI]

Dear Querist,

Query-wise reply is as under:

(a) No interest is required to be paid for the past period. The liability arises from the date of escalation of price. As per Explanation to Section 34(4) of CGST ACT, 'Debit Note' includes a supplementary invoice. Hence it is pertinent to peruse the judgement of Supreme Court reported 2015 (326) E.L.T. 450 (S.C.) = 2015 (12) TMI 594 - SUPREME COURT in the case of Steel Authority of India Ltd. Vs. CCE, Raipur.Though this case law pertains to pre-GST era, yet it is relevant to understand the issue.

(b) Interest is not recoverable.

(c) In my view, ITC can be availed on the strength of debit note.Debit note is prescribed document as per Section 34(3) Read with Rule 36(c) of CGST Rules. Undoubtedly, debit note is related to original invoice. In spite of that it is eligible for ITC inasmuch as it is a form of supplementary invoice. The date of issuance of supplementary invoice (debit note) on account of escalation in price becomes relevant date for availment of ITC and will not be hit by time bar limit.

[KASTURI SETHI]

As per Rule 36 of CGST Rules, 2017 an invoice is one of the prescribed documents for availment of ITC. So an invoice may be any type that is 'supplementary invoice' 'revised invoice'. Rule 36 does not prohibit s such invoices. Any type of invoice relates to date of payment of tax, supply of goods or services. So the date of issuance of revised invoice or supplementary invoice would be considered for time limitation for the purpose of ITC. It will not be prone to litigation.

[Madhavan iyengar]

Sir Recently this judgement has been overruled i think please see below

2019 (5) TMI - SUPREME COURT  = M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR

We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal

Most significantly, section 11A and section 11AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. We would concur with the views expressed in SKF case(2009 (7) TMI 6 - SUPREME COURT) and International Auto (2010 (1) TMI 151 - SUPREME COURT]). We find no merit in the appeals. The appeals will stand dismissed.

[VaibhavKumar Jain]

Regarding applicability of interest on additional GST liability arises thru debit note. In this relation please refer section 60 i.e. provisional Assessment.

As per sub-section 4 of section 60, the person shall be liable to pay interest on any tax payable under provisional assessment but not paid on the due date specified under subsection 7 of section 39 at the rate specified under sub-section 1 of section 50.

Period of interest shall be from the due date of payment of tax till the date of actual payment, whether such amount is paid before or after the issuance of order for final assessment.

Again refer the decision of the Supreme Court in case of Steel Authority of India Ltd. [2019 (5) TMI 657 - SUPREME COURT].

On combine reading of above, it is clear that interest shall be applicable u/s 50(1) from the due date of payment of tax as per original invoice till the date of payment of tax on debit note.

AI Summary

Input tax credit time bar: retrospective debit notes may not revive ITC; interest treatment depends on time of supply analysis. Whether debit notes issued later for past supplies create fresh tax and credit consequences is contested: suppliers may issue debit notes without a statutory time limit and may treat them as supplementary invoices causing tax liability on issue, while recipients' entitlement to input tax credit and the incidence of interest depend on statutory time limits and time of supply principles tied to the original invoice period, producing divergent professional views.