Recently, The indirect tax department has issued notices to thousands of companies that had claimed late input tax credit under GST framework and thereby asked them to reverse the transaction. These companies had claimed the input tax credit for fiscal 2018 and 2019 after missing the September deadline.
The tax department has asked them to reverse the transactions and pay interest on the wrongly claimed credit, people in the know said.
Input tax credit is a mechanism whereby companies can set off GST paid on raw materials or input services against future tax liabilities.
“It is noticed that you have filed returns after the due date specified for availing (of) input tax credit for discharging your tax liability. You shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date for furnishing of returns,” a tax notice seen Charteredonline.
Specific Commentary by CA Ankit Gulgulia (Jain) on this Issue
“I believe that the same can be challenged based on recent ruling of Gujarat High Court on this simple lines that Section 39 timeline is not decided by GSTR-3B but by GSTR-3 which is still not rolled out. See,”
“Section 16 (4) says tha registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier”
Now, the above fact that Section 39 timeline is not decided by GSTR-3B but by GSTR-3 has been upheld even by Gujarat HC in case of AAP AND CO., CHARTERED ACCOUNTS THROU AUTHORISED PARTNER VERSUS UNION OF INDIA & 3 OTHER (S) 2019 (7) TMI 401
Hon’ble High Court has analyzed the provision of Section 16(4) and Section 39 of Central GST Act, 2017 with Rule 61 to ascertain the outer time limit for availing the Input Tax Credit (ITC) under the GST laws.
CBIC has issued a press release dated press 18th October 2018 which states that, the last date for availing the input tax credit relating to the invoices issued during the period from July 2017 to March 2018 is the last date for the filing of the return in Form GSTR-3B for the month of September 2018.
While disposing of the petition, HC observed and decided that:
29. Section 39(1) of the CGST/GGST Act provides that every taxpayer, except a few special categories of persons, shall furnish a monthly return in such form and manner as may be prescribed. Rule 61 of the CGST Rules/GGST Rules prescribes the form and manner of submission of monthly return. Sub-rule 1 of Rule 61 of the CGST Rules/GGST Rules provides that the return required to be filed in terms of Section 39(1) of the CGST/GGST Act is to be furnished in Form GSTR-3.
30. It would be apposite to state that initially it was decided to have three returns in a month, i.e. return for outward supplies i.e. GSTR-1 in terms of Section 37, return for inward supplies in terms of Section 38, i.e. GSTR-2 and a combined return in Form GSTR-3. However, considering technical glitches in the GSTN portal as well as difficulty faced by the tax payers it was decided to keep filing of GSTR-2 and GSTR-3 in abeyance. Therefore, in order to ease the burden of the taxpayer for some time, it was decided in the 18th GST Council meeting to allow filing of a shorter return in Form GSTR-3B for initial period. It was not introduced as a return in lieu of return required to be filed in Form GSTR-3. The return in Form GSTR-3B is only a temporary stop gap arrangement till due date of filing the return in Form GSTR-3 is notified. Notifications are being issued from time to time extending the due date of filing of the return in Form GST- 3, i.e. return required to be filed under Section 39 of the CGST Act/GGST Act. It was notified vide Notification No.44/2018 Central Tax dated 10th September 2018 that the due date of filing the return under Section 39 of the Act, for the months of July 2017 to March 2019 shall be subsequently notified in the Official Gazette.
31. It would also be apposite to point out that the Notification No.10/2017 Central Tax dated 28th June 2017 which introduced mandatory filing of the return in Form GSTR-3B stated that it is a return in lieu of Form GSTR-3. However, the Government, on realising its mistake that the return in Form GSTR-3B is not intended to be in lieu of Form GSTR-3, rectified its mistake retrospectively vide Notification No.17/2017 Central Tax dated 27th July 2017 and omitted the reference to return in Form GSTR-3B being return in lieu of Form GSTR-3.
32. Thus, in view of the above, the impugned press release dated 18th October 2018 could be said to be illegal to the extent that its para-3 purports to clarify that the last date for availing input tax credit relating to the invoices issued during the period from July 2017 to March 2018 is the last date for the filing of return in Form GSTR-3B.
33. The said clarification could be said to be contrary to Section 16(4) of the CGST Act/GGST Act read with Section 39(1) of the CGST Act/GGST Act read with Rule 61 of the CGST Rules/GGST Rules.
In a scenario where the matching of ITC pursuant to implementation of GSTR-2 / 3 have still not been effectuation by the government and any assessee who for the sake of prudency and under existing Rule 36(4) does not takes such credit in all bonafide intention, how can he be denied the credit u/s 16(4). That will kill the spirit of GST in my view. Government must ensure suitable matching mechanism implementation first and till then any ITC lapse should be kept in abeyance.
Thanks for the write up Ankit. However, as Gujarat HC decision referred in the article has been nullified by retrospective amendment in Law notifying GSTR 3B as return under Sec 39, whether still we can rely on the judgement ?
Nevertheless, you are right that these Notices are uncalled for at this time.
Dear Nikhil, I believe that The timelines cannot be treated as mandatory for availing of credit, as the right accrues at the time of procurement of supply and making a payment. The Nullification of above as seen vide Notification No. 49/2019 – Central Tax dated 9th October, 2019 amending Rule 61(5) restrospectively specially where 18-19 had already elapsed and notification dated 9th October, 2019 cannot stand good in law as it is not clarificatory hence can’t be restrospective. This has judicial precedents. The above Guj HC pleas shall be interalia the part of Writs that will be filed. Accepting it… Read more »