Belated GST Payment under RCM - Eligibility of ITC in the year of payment

[Pradeep Singhi]

Sir,

During the F.Y 2018-19, service was received from lawyer & was also recorded in the books of accounts. However, GST liability under RCM on the said services was not paid, neither any self invoice was issued. This issue was identified in the current year i.e F.Y 2022-23.

Now, we have queries with regards to the above mentioned issue as follows:

1. Whether ITC is eligible if payment of RCM is done in current year i.e F.Y 2022-23?

2. If yes, what is the best way to reflect this transaction in our returns to avail ITC?

3. If we pay GST (RCM) vide DRC-03 selecting F.Y 18-19 & avail ITC in GSTR-3B, whether ITC will be eligilbe or not?

4. If we pay GST (RCM) vide GSTR-3B in current year & avail ITC in same 3B return, whether ITC will be eligilbe or not?

[Amit Agrawal]

Please see discussion under Issue Id: - 117652 bearing subject-line as Reverse Charge Mechanism

[Shilpi Jain]

If liability is paid now and self invoice is issued now, credit would be eligible.

Though department maybe of a different view.

Another aspect to note is that under GST the time for availing credit is linked with the date of invoice and not the date of supply. So the date of the self-invoice would be relevant to decide the due date for availing credit

[Padmanathan KV]

As Amit Ji mentioned, it is a much discussed and debated issue in this forum.

1) The eligibility of ITC of RCM for 2018-19 paid in 2022-23 entails litigation and there is no settled proposition in this regard. The primary argument of experts who opine that ITC will be available is that ITC eligibility is linked to invoice date, which is 2022-23 and hence not hit by 16(4).

2) If you wish to avail ITC (and litigate, of course), the best course of action will be to reflect is by paying in GSTR-3B and availing ITC in same 3B return.

3) If you select FY 18-19 in DRC-03, the Department may take a stand that you yourself are admitting that the liability pertains to FY 2018-19 (and hence invoice too) and ITC is time barred. In my opinion, you will end up having a weaker case.

4) You have a better case to argue if you pay RCM vide current year GSTR-3B and avail the ITC in same 3B return.

It is very much stressed that the matter is not litigation free!!!

[KASTURI SETHI]

The case is worth fighting. I agree with all the experts. Interpretation and analysis is par excellence indeed. Such reply teaches all how to represent a case.

[Kapil Gupta]

Dear experts,

Is there any time limit to issue self invoice as the taxpayer incurred the expense in 2018-19? Somehow it seems illogical that taxpayer are issuing self invoice for the expense which were paid during 2018-19.

Further, if RCM liability is being paid in current financial year 2023-24, obviously the same will be paid with interest, there is no loss to revenue if taxpayer takes credit of the same.

[Aditya Gondiker]

Though i agree to the view that availment of ITC on RCM transaction is based upon the self-invoice raised by the registered person i wish to point out that Section 31(3)(f) of the CGST Act, 2017 provides for the timelines for issuance of such self-invoice.

Section 31(3)(f) - a registered person who is liable to pay tax under sub-section (3) or subsection (4) of section 9shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both.

Therefore, the said sub-section provides that self-invoice is required to be generated on the date of receipt of goods or services. Therefore, were the services are procured in the FY 2018-19 the self-invoice was required to be generated in the said year itself and therefore there might be an issue in availment of credit though the RCM tax is paid in FY 22-23.

Will be glad to hear others views on the above interpretation.

AI Summary

Taxpayer Questions Delayed GST Liability Under RCM for Legal Services; ITC Claim Linked to Invoice Date A taxpayer identified a belated GST liability under the Reverse Charge Mechanism (RCM) for legal services received in the financial year 2018-19 but paid in 2022-23. The primary query is whether Input Tax Credit (ITC) can be claimed now and how to reflect this in returns. Experts in the forum discuss that ITC eligibility is linked to the invoice date, not the supply date, and suggest using GSTR-3B for payment and ITC claim. However, they caution that this issue could lead to litigation, as the self-invoice should have been issued in 2018-19, potentially barring ITC.