Time limit to claim input tax credit and the time limit to pay liability should be rational : a view

[Ganeshan Kalyani]

A taxpayer can claim credit of the tax paid on the purchase of taxable goods from a registered person. The conditions is that the taxpayer should have the copy of tax invoice, he should have received the goods or services or both, the supplier of goods or services should have actually paid the tax to the Government, and he should have filed his return. The tax should also populated in GSTR-2A of the taxpayer to justify the claim.

Going forward in the new return proposed to be implemented by the Government the taxpayer can claim the credit only when he accepts the invoices appearing in his GST ANX-2. If he does not accepts the invoices by the due date it will be assumed that he has accepted all the invoices and those will become his eligible input tax credit. In that case, he will be required to identify and reverse the ineligible input tax credit within the same month otherwise interest will have to be paid for claiming excess credit.

Apart from the above conditions there is one more condition which allows a taxpayer to claim input tax credit only up to the filing of GSTR-3B for the month of September following the end of the financial year. Thereafter the credit cannot be claimed. This provision is given in section 16(4) of CGST Act. In another section 18(2) time limit of one year from the date of invoice is given for the taxpayer to claim the credit in some special scenarios. If the conditions are not fulfilled then the input tax credit cannot be claimed.  

In the GST annual return FORM 9 the unclaimed input tax credit cannot be claimed. The unutilised input tax credit would get lapsed. There is no other way to claim those missed credit. The system is designed in such a way that it will not allow the taxpayer to claim the unutilised credit.

The returns are filed with utmost due care. However some credits are missed to be claimed. The detailed reconciliation which happens at the time of audit helps to know the credit which is missed to be availed and any liability which left to be paid. In both these situation the Government asks the taxpayer to pay the tax not paid but does not gives opportunity to take credit which was not taken. The time limit set to claim credit is very less as compared to the time given for the tax payable but not paid.

In the erstwhile tax regime under Central Excise and Service tax there was one year time limit to claim the credit otherwise the credit is not allowed. In Value Added Tax Act (VAT) also there was a time limit to claim the credit. However there was not more time given to the taxpayer to pay the tax not paid.

Discussions to this article

[Ganeshan Kalyani]

Correction: please read the last sentence as 'However there was not much time given to the taxpayer to claim the credit.'