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

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.