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.

AI Summary

Forum Explores Inadmissible Credit Under CGST Act's Section 16(4), Filing Deadlines, and Rule 36(4) Implications A discussion forum addresses concerns regarding inadmissible credit under Section 16(4) of the CGST Act, 2017. Participants discuss the inadmissibility of input tax credit if GSTR-3B returns for specific financial years are filed after stipulated deadlines. The forum highlights the need to deposit inadmissible credit amounts with interest via FORM DRC-03 to avoid penalties. Contributors provide interpretations of the Act's provisions and share personal experiences with similar notifications from the CGST Department. They also discuss potential system errors affecting credit claims and the implications of Rule 36(4) on credit eligibility.