Tax liability/ ITC of RCM transaction for FY 2021-22

[AKSHAT AGARWAL]

In one of case, client have not paid RCM on certain expenses for FY 2021-22. Case is under audit for FY 2021-22. Above transaction involves tax of Rs. 4.5 Lac. Now the ITC of such RCM can be taken by paying the same through April-25 GSTR-3B keeping in view the amended provision of Sec-47A of CGST Rule, 2017.

Thanks

[YAGAY andSUN]

Here's a detailed breakdown and our Inputs on your query: -

Background:

• The client did not pay Reverse Charge Mechanism (RCM) GST on certain expenses during FY 2021-22.
• The case is under audit for FY 2021-22.
• The tax amount involved is ₹4.5 lakh.
• The client is now willing to discharge RCM liability and claim ITC in the GSTR-3B of April 2025.
• You mentioned Rule 47A of CGST Rule, 2017 — likely referring to the amended time limit for availing ITC.

Legal Basis – ITC on RCM under GST:

Under GST law:

• RCM tax must be paid in cash (not through ITC).
• Once paid, ITC can be claimed, subject to the time limits laid down in Section 16(4) of the CGST Act, 2017.

Key Amendment – Section 16(4):

• Before amendment: ITC on any invoice or debit note had to be claimed by the due date of GSTR-3B for September following the end of the financial year, or before filing the annual return, whichever was earlier.
• After amendment via Finance Act 2022 (effective 01-Oct-2022): The time limit was extended to 30th November of the next financial year.
• Finance Act 2023 added Section 47A – but this relates to automatic compounding of late fees, not ITC. You likely meant Section 16(4) instead.

Current Position (as per latest provisions):

For FY 2021-22, the last date to avail ITC would have been:

• 30th November 2022 (as per amended Section 16(4)).

So, availing ITC in April 2025 is not permissible for FY 2021-22 RCM liability because the time limit has already lapsed.

Conclusion:

• Your client can and should pay the RCM liability now (₹4.5 lakh) to rectify non-compliance and avoid further interest/penalty.
• However, ITC cannot be claimed in April 2025, as the time limit to claim ITC for FY 2021-22 expired on 30-Nov-2022.
• This tax amount will therefore become a cost to the business.

[AKSHAT AGARWAL]

Sir, I have wrongly mentioned Sec-47A, I am discussing in light of provision of Rule-47A

[Sadanand Bulbule]

I endorse the ponit-wise explanation offered by Yagay Sir

[Shilpi Jain]

In case it is a procurement from an unregistered person then issuing a self invoice now and availing credit is possible. 

Issuing invoice after 30 day time limit can be regarded as a procedural violation and cannot deny credit altogether.

AI Summary

Taxpayer Faces Challenge in Claiming Input Tax Credit Beyond Statutory Time Limit for Reverse Charge Mechanism Expenses A client did not pay Reverse Charge Mechanism (RCM) GST on certain expenses for fiscal year 2021-22, involving a tax amount of Rs. 4.5 lakh. The case is under audit, and the client seeks to discharge the RCM liability and claim Input Tax Credit (ITC). However, the time limit for claiming ITC for that fiscal year expired on 30 November 2022, making ITC claim in April 2025 impermissible. The client should pay the RCM liability to rectify non-compliance, but the tax amount will become a business cost.