Time limit for claiming ITC under RCM

[ROHIT GOEL]

Dear Sir,

One of our clients had paid legal fees to advocates during FY 2019-20 but excluded to deposit RCM on same. On being pointed out during GST Audit, the client has deposited the same with interest however he maintains that he is eligible to claim ITC on the same in GSTR-3B of Mar 2021 i.e. month of deposit.

The basis for same has been stated to be that as per section 31(3)(f), he is liable to self-invoice for RCM supplies from URD persons. Even though the time of supply provisions clearly mandate issue of invoice within 30 days, they do not impose upper limit. As such, in opinion of client he has self-invoiced in March 2021 and as such his claim of ITC is within time as per section 16(4) as same only restricts ITC to Sep of next year from the year in which invoice is issued.

However, in our opinion, same would be contrary to intention of law and ITC would be inadmissible u/s 16(4). What is the view of the experts regarding the same?

[Amit Agrawal]

Dear Professional colleagues,

I am personally in the camp that 'Date' of invoice is relevant factor for determining time-limits to avail ITC u/s 16 (4). In other words, the words 'pertains to' u/s 16 (4) refers to 'Date of Invoice' and not period when services were provided.

Consequently, even if there is delay in raising self-invoice under Section 31 (3) (f), even then, 'Date of such invoice' is relevant factor for determining factor for determining time-limits to avail ITC u/s 16 (4) and not the 'date' when such invoice was supposed to be raised.

And delay in raising such self-invoice should invite general penalty and not denial of credit per se.

However, I am aware that there is strong contrary views (as can be seen from preceding discussion here itself).

Even though debit-note (which includes supplementary invoice) has become savior w.e.f. 01.01.2021, issue remains controversial for ITC availed for period till 31.12.2020.

Hence, at serial No. 40 above, I tried to put some arguments. I am perfectly aware about possibility of self-fallacy of the arguments so put (For example: 'invoice' referred u/s 31 (3) (f) also needs to be read as per definition given u/s 2 (66)).

My idea of seeking your views is to check / know what are / can be additional grounds of defense for period prior to 01.01.2021 (i.e. in additional to ground/s reflecting my position at start of this serial No. 41).

As this is problems faced across the industry where ITC will be tried to be denied even when tax-payer has paid taxes with interest under RCM, I am looking for alternate / additional grounds of defense.

Requested accordingly.

Note: As said before, I am putting alternate possibilities here purely from point of brainstorming with fellow professionals (& hence, same should not be construed as professional advice or suggestion in any way).

[Amit Agrawal]

Dear Professional colleagues,

This is in continuation of my last message:

Para 2 of above-said clarification given in Circular No. 160/16/2021-GST dated 20.09.2021 reads as follows:

The intent of law as specified in the Memorandum explaining the Finance Bill, 2020 states that “Clause 118 of the Bill seeks to amend sub-section (4) of section 16 of the Central Goods and Services Tax Act so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit.

From these wordings, I feel that even Dept. holds a view that the words' 'pertains to' used u/s 16 (4) refers to 'Date' of invoice / debit note and NOT to 'Period / Date when supply actually took place'.

However and considering contrary view which got its own logical reasoning (& it is most likely that Dept. may try to deny such ITC for the period till 31.12.2020), I request and welcome alternate grounds of defense from you all to defend ITC availed against 'Self Invoices' - though issued belatedly (i.e. after Sept on next financial year) - u/s 31 (3) (f).

AI Summary

Input tax credit time limits under reverse charge may be contested when self invoice is issued late, risking denial and dispute.
Whether a belated self invoice or debit note issued by a recipient under reverse charge permits claiming input tax credit turns on the interaction between the requirement to self invoice for certain unregistered supplies, the time of supply rules and the limitation in the entitlement provision which disallows credit after the return due for September following the financial year to which the invoice or debit note "pertains." Experts disagree whether "pertains to" refers to the period of supply or to the invoice/debit note date, and practical considerations include payment of tax with interest, possible penalties, and litigation risk, with post amendment treatment of debit notes reducing but not eliminating uncertainty.