Input tax credit

[Bharat Cholleti]

Dear sir,

Goods billed on 31st of the Month but received in next month, ITC reflected in 2B in the month as per date of bill. Taxable person claimed ITC as per 2B. Section 16(2) of CGST Act one of the condition is to claim ITC goods must have been received. In a given situation ITC claimed as per 2B is there any penal consequences. please advise.

[KASTURI SETHI]

See Section 122(vii) of CGST Act. A penalty of Rs.ten thousand or equal to the ITC availed, whichever is higher, is imposable upon the offender. Section 16 is very much clear in this aspect. ITC cannot be availed in such situation. ITC can be availed only after physical receipt of the goods in the registered business premises.

[Bharat Cholleti]

Thank you sir,

Section 122(VII) says where there is non receipt of goods, here goods are actually coming in next month, claiming ITC as per 2B will be a procedural lapse and may end up to minor penalty or so. my view sir.

[KASTURI SETHI]

Goods were NOT in your possession on the date of taking ITC. You cannot deny this very fact.It tantamounts to availing credit without physically receipt of goods (may be even for a day).

Penalty is imposable upon the defaulter even for a procedural lapse. Minimum imposable penalty cannot avoided for procedural lapse, if SCN is issued.

[Aakash Deb]

Kindly Reverse the input in cash with 24% interest immediately and do not worry.

If the amount of ITC availed is more than the amount mentioned as per penal provisions then it is better to wait for the department to make their move. Once they issue you notice you can try to explain the incident to them as a minor procedural lapse. and can get away with a minimum penalty.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir.

[shwetal oswal]

Please refer the explanation to 16(2)(b) :

For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services––

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

[KASTURI SETHI]

The word, 'deemed' does not negate the physical possession of goods (inputs) for availment of ITC. The above 'Explanation' conveys altogether different message.

[Shilpi Jain]

In this case ultimately the goods were received. It is not a case that the ITC is enjoyed without receipt of any goods. Thereby, I see only interest being a consequence.

[ranjit pandey]

Respected Kasturi Sir, can you please through some light on explanation in Section 16(2)(b)

[KASTURI SETHI]

Section 16 (2)(b) says ITC cannot be availed without physical possession of goods and services.

[Padmanathan KV]

In my opinion, the conditions under section 16(2) has to be satisfied before taking the credit.

Further, section 122(1)(vii) states "takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;"

Therefore, penalty under section 122(i)(vii) may be attracted in this case.

AI Summary

Input tax credit eligibility depends on physical receipt of goods; premature claims risk reversal, interest and penalty exposure. Claiming Input Tax Credit before actual physical receipt of goods because an invoice appears in the electronic statement contravenes the entitlement condition requiring possession; the deeming provision for delivery or transfer of documents does not necessarily replace the physical possession requirement. Improper credit availment can trigger reversal, interest and potential penalty exposure under the penal provision for taking credit without actual receipt, subject to departmental fact finding and issuance of show cause proceedings.