Advisory Regarding inadmissible credit availed in violation of provisions of Section 16(4)

[VISHNU VANKADARA]

Sir

I have received the below the mail in regard to a client from CGST Department . Could you please guide us on this????

As you are aware, in terms of provisions of Section 16(4) of the CGST Act, 2017 any of the registered persons filing their GSTR-3B return in respect of the last two financial years (July 2017-March 2018 and 2018-19) after 30.04.2019 and 20.10.2019 respectively, could not have availed any credit on invoices or a debit note pertaining to the relevant financial year except in respect of IGST paid on import of goods by such registered persons. Accordingly, any credit availed in violation of provisions of Section 16(4) is inadmissible.

2. Records indicate that you have filed your GSTR-3B return for Jan-2018 after the said due dates in which you have availed credit of ₹ 18229 which is inadmissible under Section 16(4) of the CGST Act, 2017.

3. You are advised to deposit the amount equivalent to tax paid using such inadmissible credit through FORM DRC-03 with applicable interest.

4. In case the opportunity for voluntary compliance as suggested is not availed, appropriate action for recovery of tax paid using such inadmissible credit with interest and imposition of penalty shall be initiated as per the law.

[Rajagopalan Ranganathan]

Sir,

Section 16 (4) of CGST Act, 2017 states 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

In this connection you please furnish the date of filing of return for January 2018. If you have filed the return before 20.10.18, that is, the last date for filing return pertaining tp September 2018 then you are eligible to take the credit. However the Department's e-mail indicates that it is not the case. Please clarify.

[KASTURI SETHI]

Also go through Board's Order No. 02/2018-Central Tax, Dated 31.12,.2018 which is extracted below:-

2. In sub-section (4) of section 16 of the said Act, the following proviso shall be inserted, namely: -

“Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”.

[sandeep k]

I have also received same email:-

Dear ...

As you are aware, in terms of provisions of Section 16(4) of the CGST Act, 2017 any of the registered persons filing their GSTR-3B return in respect of the last two financial years (July 2017-March 2018 and 2018-19) after 30.04.2019 and 20.10.2019 respectively, could not have availed any credit on invoices or a debit note pertaining to the relevant financial year except in respect of IGST paid on import of goods by such registered persons. Accordingly, any credit availed in violation of provisions of Section 16(4) is inadmissible.

2. Records indicate that you have filed your GSTR-3B return for Nov-2018 after the said due dates in which you have availed credit of ₹ 12019 which is inadmissible under Section 16(4) of the CGST Act, 2017.

3. You are advised to deposit the amount equivalent to tax paid using such inadmissible credit through FORM DRC-03 with applicable interest.

4. In case the opportunity for voluntary compliance as suggested is not availed, appropriate action for recovery of tax paid using such inadmissible credit with interest and imposition of penalty shall be initiated as per the law

Return was filled on 31 Dec 2018. Which was 11 days late.

What should be done ?

[Mr Rao]

Dear querist,

Nicely explained by experts. In other words, a registered person can avail credit on any invoice or debit note pertaining to the year 2017-18 (July,2017 to March, 2018) for supply of goods or services or both till 10.04.2019 for regular taxpayers and 30.04.2019 for the taxpayers eligible to file GSTR-1 on quarterly basis. For 2018-19, the last date of availment of credit was 20.10.2019. As such, if any of the registered persons were to file any return in respect of the last two financial years {i.e.,2017-18 (July, 2017 to March,2018) and 2018-19 } after the due dates mentioned above, no credit could have been availed except in respect of IGST paid on import of goods by such registered persons (where the credit has been availed on the strength of of bill of entry in table 4A.1 in Form GSTR-3B). In view of the above, any credit availed in these returns is recoverable by Department.

[KASTURI SETHI]

I agree with Sh.G.B.Rao. Well explained. I think the querist must have got answers to his query.

[sandeep k]

Dear All ,

Thank you for answer.

Today - New email arrived.

As you are aware, Rule 36(4) of the CGST Rules 2017 notified w.e.f. 09.10.2019, restricts availment of credit to 120% of the eligible credit based on invoices/debit notes uploaded by the supplier in their GSTR-1s. From 1st January 2020, the eligibility has got reduced to 110% of such eligible credit.

2. Records indicate that in your GSTR-3B return for Nov-2018 you have availed credit of ₹ 12019.46 more than the credit admissible under Rule 36(4) of the tax reflected in your GSTR 2A for the said period.

3. You are advised to reverse the amount of credit availed in excess. In case such credit has been utilised for paying tax, the same may be deposited through FORM DRC-03 with applicable interest.

4. In case the opportunity for voluntary compliance as suggested is not availed, appropriate action for recovery of excess ITC ava

i checked my GST Dashboard , my B2B Invoices in Online Autodrafted GSTR-2A for NOV 2018 is showing empty and the all these invoices for month Nov are being shown in Month DECEMBER. (Means my DEC .GSTR-2A showing Inward invoices for 3 months ie. Oct, NOV, DEC)

Is this means a system ERROR?

Thanks

[girish maru]

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 bothafter the due date of furnishing of the return under section 39 for the month of Septemberfollowing the end of financial year to which such invoice or invoice relating to such debit notepertains or furnishing of the relevant annual return, whichever is earlier.

as per this intention of Legislature seems to restrict ITC to be claimed by and in September Return and not that ITC will not be allowed at all if Return of the Particular financial year is filed after Due Date of September return.

if the interpretation as taken as ITC is not allowed if returns are filed after due date of Septermber return, is it correct? what about Right of Taxpayer to claim ITC.

AI Summary

Input tax credit limitation: delayed returns can render credit inadmissible and require reversal or deposit with interest. Section 16(4) restricts entitlement to input tax credit where returns for the relevant financial year are filed after the statutory cut off tied to the September return following that year or the annual return, making credits claimed after those due dates inadmissible except for IGST on imports. Taxpayers identified as having availed inadmissible credit are advised to reverse or deposit the amount via FORM DRC-03 with interest; non-compliance will lead to recovery and penalties. A proviso allowed a time-limited extension for invoices of 2017 18 where suppliers uploaded details, and Rule 36(4) caps credit admissibility against supplier-uploaded invoices.