When is Credit taken?

[Arun Agarwal]

Assuming that the conditions of section 16(2) are met, can it be argued that the credit is actually taken when accounted for in the books? Any case laws supporting this argument.

Thanks in advance.

[Shilpi Jain]

There is a high court case that Section 16(4) related to time limit to avail credit is also a condition to be satisfied separately even if 16(2) conditions met.

Ideally the credit should have been taken in electronic credit ledger.

Only taking credit in books will not find favour in forum below tribunal and courts. So if the amount is significant you could consider litigating

[Ganeshan Kalyani]

I agree with the view of expert. Only accounting the credit in books would not mean that you have taken the credit. You have to furnish in GSTR-3B and thereby get is reflected in Electronic Credit Ledger (ECL). Once it appears in ECL then it is said you have claimed the credit.

[KASTURI SETHI]

I agree with both experts. 

The foundation of ITC is the books of accounts. This is also requirement of Section 16 of CGST Act. The entries in Common Portal System and books of accounts both are mandatory. You will have to face the litigation, if ITC is taken without auto populated entries on Common Portal System.

We cannot forget that the entries in the books of accounts are manipulable but not on Common Portal System. So, regarding time limit,  no advantage can be taken on the basis of the entry in the books of accounts.       

           

[KASTURI SETHI]

Thirumalakonda Plywoods Versus Assistant Commissioner Of State Tax, Anantapur-2023 (7) TMI 1226 - Andhra Pradesh High Court

W.P. No. 24235 of 2022, decided on 18-7-2023

PARA NO.19

"Hence unless such clear inconsistency is established, overriding effect cannot be given over other provisions. In the present case both Section 16(2) and (4) are two different restricting provisions, the former providing eligibility conditions and the latter imposing time limit. However, both these provisions have no inconsistency between them. In R.S. Raghunath, the Apex Court further observed thus :

“But the non-obstante clause need not necessarily and always be co-extensive with the operative part so as to have the effect of cutting down the clear terms of an enactment and if the words of the enactment are clear and are capable of a clear interpretation on a plain and grammatical construction of the words the non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the Special Rules.”

[Amit Agrawal]

One of the conditions u/s 16(2) - to be entitled to the credit of any input tax - is that tax-payer (who is availing ITC) has filed return u/s 39. 

As per Section 41(1), Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

GST Credit: Entry in Books Isn't Enough, Must Reflect in ECL via GSTR-3B per Sections 16(2) & 16(4) CGST Act. A discussion on a forum addresses when credit is considered taken under the Goods and Services Tax (GST) system. The consensus among participants is that merely accounting for credit in the books does not constitute taking credit. Instead, it must be reflected in the Electronic Credit Ledger (ECL) through filing GSTR-3B. Legal precedents and sections 16(2) and 16(4) of the CGST Act are referenced, highlighting that both the entry in the Common Portal System and the books of accounts are mandatory. Failure to comply with these requirements may result in litigation.