REVERSE CHARGE MECHANISM

[Guest]

During GST Audit FOR 2017/18, addl. RCM liability of F.Y. 17/18 is determined and payable. If paid on 6.2.2020, when to claim the credit for such amount paid. ? Can such credit be used against GST liability for the month of Jan.2020?

Thanks and regards

[NISHANT SHAH]

Dear Sir,

You can not set off the credit of same from GST Liability since time limit for availing credit is already lapsed. Yes you can definitely get its refund by applying refund appl u/s 54rule 89 of GST Act.

[KASTURI SETHI]

Yes, you can take ITC on the amount of additional liability arose. It is not time-barred because the time of supply under RCM is date of payment as per Section 13(3) of CGST Act.Under RCM you are deemed supplier of service. You are to raise self-invoice i.e. supplementary invoice. Supplementary invoice is at par with a tax invoice (See Board's Circular appended below).Here the date of self-invoice (supplementary invoice) is relevant for availing ITC. Basic document is supplementary invoice coupled with the challan of payment of additional amount of GST. The date of payment is also relevant. You qualify to both parameters. You can also raise revised self invoice in terms of Rule 53(1)(a) of CGST Rules, 2017.

Go through the following word for word carefully:-

Time of supply of services

Section 13(3) provides that in case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely :-

• the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

• the date immediately following 60 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.

Debit Note in GST

C.B.E. & C. Flyer No. 16, dated 1-1-2018

Introduction

A supplier of goods or services or both is mandatorily required to issue a tax invoice. However, during the course of trade or commerce, after the invoice has been issued there could be situations like :

• The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.

• The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.

• The quantity received by the recipient is more than what has been declared in the tax invoice.

• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as debit note to the recipient. The debit note also includes supplementary invoice.

Meaning

When a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing the prescribed particulars.

Format

There is no prescribed format but debit note issued by a supplier must contain the following particulars, namely :-

(a) name, address and Goods and Services Tax Identification Number of the supplier;

(b) nature of the document;

(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-’’and “/’’respectively, and any combination thereof, unique for a financial year;

(d) date of issue;

(e) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

(f) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

(h) value of taxable supply of goods or services, rate of tax and the amount of the tax debited to the recipient; and

(i) signature or digital signature of the supplier or his authorized representative.

Tax liability

The issuance of a debit note or a supplementary invoice creates additional tax liability The treatment of a debit note or a supplementary invoice would be identicalto the treatment of a tax invoice as far as returns and payment are concerned.

Records

The records of the debit note or a supplementary invoice have to be retained until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. Where such accounts and documents are maintained manually, it should be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

Conclusion

The debit note or a supplementary invoice is therefore a convenient and legal method by which the value of the goods or services in the original tax invoice can be enhanced. The issuance of the debit note will easily allow the supplier to pay his enhanced tax liability in his returns without requiring him to undertake any other tedious process.

AI Summary

Dispute Over Claiming Input Tax Credit for RCM Liability from 2017/18 Audit: Time Limit Lapsed or Refund Possible? A query was raised regarding the claiming of Input Tax Credit (ITC) for additional Reverse Charge Mechanism (RCM) liability determined during a GST audit for the financial year 2017/18, paid in February 2020. One respondent advised that the credit cannot be set off against GST liability as the time limit for availing credit has lapsed, but a refund can be applied for under GST rules. Another respondent argued that ITC can be claimed as the time of supply under RCM is the date of payment, and a self-invoice can be issued to avail ITC, as per the CGST Act and related rules.