NEW CHANGES IN INPUT TAX CREDIT

[Dr. Sanjiv Agarwal]

The Finance (No. 2) Act, 2017 had amended section 16 of CGST Act, 2017 dealing with Input Tax Credit by inserting two new sub-section (5) and (6) with retrospective effect from 1^st July, 2017. These provide that the time limit to avail input tax credit under provisions of sub-section (4) of section 16 of CGST Act has been retrospectively extended in certain specified cases. It is also provided that no refund of any tax paid or the input tax credit reversed shall be granted on account of the said retrospective insertion of sub-section (5) and sub-section (6) of section 16 of the CGST Act.

Special procedure for rectification of orders

Vide Notification No. 22/2024 –Central tax dated 08.10.2024, a special procedure for rectification of orders has been notified under section 148 of the CGST Act, to be followed by the class of taxable persons, against whom orders under section 73 or section 74 or section 107 or section 108 of the CGST Act have been issued confirming demand for wrong availment of input tax credit on account of contravention of provisions of sub-section (4) of section 16 of the CGST Act, but where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the CGST Act, and where appeal against the said order has not been filed.

CBIC clarifications

CBIC has clarified vide Circular No. 237/31/2024-GST dated 15.10.2024 on implementation of the said provisions in various situations, i.e.,

• Where no demand notice/statement has been issued under section 73 or section 74 of the CGST Act.
• Where demand notice/ statement under section 73 or section 74 of CGST Act has been issued but no order under section 73 or section 74 of CGST Act has been issued by the Adjudicating Authority.
• Where order under section 73 or section 74 of the CGST Act has been issued and appeal has been filed under section 107 of the CGST Act with the Appellate Authority but no order under section 107 of the CGST Act has been issued by the Appellate Authority.
• Where order under section 73 or section 74 of the CGST Act has been issued and Revisional Authority has initiated proceedings under section 108 of the CGST Act, but no order under section 108 of the CGST Act has been issued by the Revisional Authority.
• Where order under section 73 or section 74 of the CGST Act has been issued but no appeal against the said order has been filed with the Appellate Authority, or where the order under section 107 or section 108 of the CGST Act has been issued by the Appellate Authority or the Revisional Authority but no appeal against the said order has been filed with the Appellate Tribunal.

• The taxpayers can file an application for rectification electronically, after login to www.gst.gov.in, using their credentials.
• While filing such application for rectification of order, the taxpayer shall upload along with the application for rectification of order, the information containing inter-alia the details of the demand confirmed in the said order of the input tax credit wrongly availed on account of contravention of sub-section (4) of section 16 of the CGST Act, which is now eligible as per sub-section (5) and/or sub-section (6) of section 16 of the CGST Act.
• Such application for rectification shall be dealt by the proper officer who had passed the order for which the said rectification application has been filed.
• Said officer shall take a decision on the said application for rectification and issue the order, as far as possible, within a period of three months from the date of such application.
• Where the rectification adversely affects the said person, the principles of natural justice shall be followed by the said proper officer.
• In cases where any rectification has been made by the proper officer in the order for which the rectification application has been filed, an appeal against such rectified order can be filed under the provisions of section 107 or section 112 of the CGST Act, as the case may be, within the time limit specified therein.
• The rectification application of an order issued under section 73 or section 74 or section 107 or section 108 of the CGST Act, can be filed under the special procedure notified vide notification No. 22/2024 – Central tax dated 08.10.2024, within a period of six months from the date of issuance of the notification, only in cases where the issue or one of the issues on which the demand has been confirmed in the said order, pertains to wrong availment of input tax credit on account of contravention of provisions of sub-section (4) of section 16 of the CGST Act, and where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the CGST Act.
• In cases where no such issue is involved and a taxpayer requires to file an application of rectification of an order, such rectification application can be filed by the taxpayers only under the provisions of section 161 of the CGST Act, within the time limit specified.
• Where it is found that the issues in the said order do not involve any issue of wrong availment of input tax credit on account of contravention of provisions of sub-section (4) of section 16 of the CGST Act, and where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the CGST Act, such an application would be summarily rejected by the proper officer.

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