Availability of ITC when ITC reflected in GSTR 2A after the time limit prescribed under Section 16(4)

[Rajesh Kumar]

Sir/ Madam

Is ITC of the invoices of March 2018, March 2019 and March 2020 is available to the buyer when seller files his GSTR -1 after 20th October 2018, October 2019 and October 2020 respectively ? Means the invoices are hit by the time limit prescribed under Section16(4) of the CGST Act 2017.
In this case, if seller files late GSTR 3B and GSTR-1 returns after 20 th October of next Finance Year, then seller himself not eligible for ITC and buyer also not eligible of ITC passed on by that seller . Am I right ? Please guide

Regards

[Alkesh Jani]

Shri

Prima facie I agree with your views, but if invoices are reflected in 2A, then one can avail ITC if GSTR-3B is filed late.

As on now, GSTR-2 and GSTR-3 are in abeyance, the only way to avail ITC is through GSTR-3B.

Thanks

[KASTURI SETHI]

Sh.Rajesh Kumar Ji,

If you take ITC on the basis of GSTR 2A (auto-populated in the Common Portal System) that is not beyond CGST Act inasmuch as Common Portal has been enforced under Section 146 of CGST Act.That is within the Act. If there is disharmony between Common Portal and CGST Act, the assessee is not at fault.

Hence I agree with Sh.Alkesh Jani Ji.

[Rajesh Kumar]

Sir

Can department take coercive action like arrest when the total ITC is more than 5 crores which is not eligible as per section 16(4) of the CGST Act 2017 ?

[KASTURI SETHI]

Permission is required from Commissioner. To arrest a person culpable state of mind is must. Mala fide intention to evade tax. Go through Section 132 (5)(l)(i)(ii)(iii)(iv) of CGST Act.

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;

(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine;

(iv) in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.

[KASTURI SETHI]

Just for knowledge sake

Arrest can be made before assessment but with prior approval of the jurisdictional Commissioner.

[Shilpi Jain]

I am analysing this aspect and hopeful to come up with a view that credit would be eligible even if the vendor diles his GSTR-1 and 3B late. However, this view for sure is to be disputed by department, though this is a possib,e view.

So one can consider taking credit and reversing under protest or not utilising it. Later on a favorable decision, can be utilised.

[Amit Agrawal]

Time-restrictions to take ITC u/s 16 (4) got no relevance to date of filing GSTR-1 and 3B by the supplier. Hence, if buyer had taken ITC against subject invoices within time-restrictions of section 16 (4), delay in filing GSTR-1 and 3B by the supplier does not matter.

Once there is no delay in taking ITC at the end of buyer and eligibility of ITC is otherwise not in dispute, delay by the supplier does not matter in my view.

And restrictions shown for ITC at end of buyer in GSTR-2A in the portal got no legal backing in my view.

This view gets more support once one note the clause (aa) inserted in Section 16 (2) by section 109 of Finance Act, 2021 (which is till date, is not made effective / operative).

Note of caution: For ITC availed on or after 09.10.2019, one also needs to consider potential effects of restrictions brought by way of sub-rule (4) of Rule 36 and defenses thereto.

All above should be treated as strictly personal views of mine only and not as a professional advice or suggestion.

[Amit Agrawal]

With regards to concerns raised by the Querist vide Post No. 3, my views are as under:

1. Due to reason explained in earlier post, if there is no wrong availment of ITC, there is no question of any offense by the buyer. Hence, question of coercive action like arrest should not ideally arise.

2. Even otherwise, contravention of 'taking ITC after time-limit prescribed u/s 16 (4)' per se does not fall within offenses listed in 'clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section'. Hence, power to arrest available under Section 69 - should not ideally come into picture.

3. But, querist should submit proper replies with all grounds to Dept. explaining its legal stand and reasoning, including (and only if threat of arrest is genuine / real) why no offenses - as listed above - attract present scenarios.

4. If fear of arrest still persist, it would be better if it approaches & meet senior officer including jurisdictional Commissioner and explain its position in person.

5. All this should ideally eliminate threat of arrest. If still not (a highly unlikely scenario), the querist needs to consider approaching court either seeking anticipatory bail or High court seeking action against denial of ITC in GSTR-2A by GST portal when law does not support such action.

All above should be treated as strictly personal views of mine only and not as a professional advice or suggestion.

AI Summary

Input tax credit eligibility when supplier files returns late: buyers may claim credit if invoices appear in the portal, subject to conditions. Input tax credit may be claimed by a buyer when invoices appear in the portal's auto-populated purchase register despite the supplier's late return filings, provided the buyer meets substantive statutory eligibility. Portal discrepancies do not automatically negate entitlement; operational restrictions in documentary rules and yet-to-be-commenced statutory amendments must be considered. Where claim is disputed, taxpayers may reverse credit under protest or withhold utilisation while preserving rights. Enforcement, including arrest, requires culpable intent and threshold amounts for wrongful availment; absent wrongful availment, criminal action is unlikely, though administrative engagement or judicial relief may be necessary.