Input credit time limit in case of import (Bill of entry), Goods and Services Tax - GST

[sunil bhageria]

Wether same time limit for taking input credit is applicable in case of Imports vide bills of entry i.e. filing of return of Sept. or annual return whichever is earlier or there is no time limit to claim input credit of IGST paid on imports (Bill of entry)

Posts / Replies

[KASTURI SETHI]

Bill of entry is a prescribed document under Rule 36(1) (d) of CGST Rules, 2017 for availment of ITC. So this rule is to be read with Section 16(4) and Section 18(2) of CGST Act for the purpose of computation of time limit. Time limit for availment of ITC mentioned in Section 16(4) and Section 18 (2) of CGST Act, 2017 is also applicable to IGST paid on imports on the strength of Bill of entry or any similar document.

Read this

"(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports

[Rachit Agarwal]

Limitation period for availment of credit is prescribed in Section 16(4). Section 16(4) specifically refers to invoice or debit note. Bill of Entry being a separate from invoice. Hence time limit prescribed in section 16(4) not applicable for availing the credit of input tax

[Kashish Gupta]

Hi Rachit

I agree with your view. Had analysed this recently and formed the same view.

Regards

[CSSANJAY MALHOTRA]

Time limitation is applicable for availing ITC on Bill of entry. Sh Kasturi ji views are correct but to be read as per section 20 of IGST act which provides for applicability of provisions relating to input tax act as placed in CGST Act.

Imports are governed under IGST Act and input tax credit for same (eligibility and restrictions) is to be complied with provisions laid down under CGST act ( refer section 20 of IGST Act).

[KASTURI SETHI]

Sh CS.Sanjay Malhotra Ji,

Sir, I am thankful to you for your clarification on the issue and giving finishing touch to my reply.But for your intervention, my reply would have remained incomplete and inconsequential. I have gone through Section 20 of IGST Act, 2017 ( emphasis is supplied on (iv-Input Tax Credit) . I should have mentioned how Section 20(iv) of IGST Act is integrally related to Section 16(4) of CGST Act and Rule 36 (1)(d) of CGST Rules, 2017 for applicability of time limitation for availing ITC on the strength of a bill of entry.

 

[Alkesh Jani]

Dear Experts,

For sake of my knowledge, I raise this query. Section 18(2) states that time limit for availing ITC under sub-section (1) of Section 18…, will this be applicable to Bill of Entry?

Moreover, Rule 36 (1) mentions of Bill of Entry but Rule 36(2) states that …, is furnished in FORM GSTR-2 by such person, how to comply with this rule?

Thanks

[sunil bhageria]

Thanks to all the expert who have given their views on this matter but there is difference of opinion among various experts hence the matter become more confusing. On reading of the referred sections/rules I also of this opinion that why they have not mentioned Bills of entry in section 16(4) in addition to invoice and debit note while in rule 36(1) i.e. eligible documents for input tax credit they have specifically mentioned Bills of entry and similar document in (d)(though bill of entry do not fall under CGST as it always have IGST).SO mentioned bill of entry as a valid document for availing input credit in rule 36(1)(d) and including the same in Section 16(4) for limitation period gives the impression that limitation period is not applicable on input credit taken on Bills of entry. If any body is having some more clarity on the matter then please come forward and provide is views with related legal provisions.

[Alkesh Jani]

Shri

Non-mentioning of Bill of Entry is very obvious as the bill of entry is a document for assessment of imported goods, the assessment made by the Customs authority vide Bill of entry is appealable before Commissioner (Appeals). the duty paying document is TR-6 (GAR) Challan and that can be the base for availing the ITC for purpose of Section 16 (paid to government through cash or credit).

Thanks

[CSSANJAY MALHOTRA]

Dear Mr. Sunil,

You have to take call by going through relevant provisions as stated in GST Act which is very clear and have no scope for any confusion / ambiguity. Sh, Kasturji ji correctly explained barring citing reference for Section 20 of IGST.

Please understand that Imports & Exports are governed under IGST Act. Further Section 20 of IGST Act prescribes for applicability of provisions under CGST Act to IGST Act. Similarly Rule 2 of IGST Rules makes CGST provisions applicable to IGST.

Further in reference to query raised by Mr. Alkesh, to reiterate above and request to go through Section 18(1) all clauses and then read with Rule 40 of CGST Rules also besides Rule 36 to clear your doubts. Rule 36 can’t be made blindly applicable to all clauses as referred to in Section 18(1) of CGST Act as the said section is for credit availability in special circumstances.

As on date, GSTR-2 is not in place but had it been so, taxpayer needs to key in details of Bill of Entry in Table 5 which should take your ITC to E-Credit Ledger. Further the same is not applicable for persons falling under some clauses in Section 18 (1) of CGST Act on account of person being unregistered or not availing Credit being under composition scheme.

GSTR-3B (Table 4) provides for mentioning the self assessed details for ITC (Import of Goods) and fulfills the criteria of GSTR-2.

In case of Bill of Entry, taxpayer pays the tax and has evidence of payment whereas in case of domestic supplies, the returns filed by GSTR-1 and auto populated details in GSTR-2A serves the purpose of credit eligibility.

Rest is queriest call to proceed ahead with.

[Chitresh Gupta]

Dear All

In my view, the imports of goods are governed by Customs Act Only, not IGST Act.

That is the reason, the imports are not considered in the definition of supply under section 7 of the CGST Act.

Thus. section 16(4) does not apply in case of Bill of Entry.

Participants are free to post their views.

Regards

CA. Chitresh Gupta

[CSSANJAY MALHOTRA]

Dear Chitresh,

Issue involved at present is ITC on Imported goods against Bill of Entry which is governed by IGST Act and not Custom Act.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Query-wise reply is as follows:-

1.Yes, it has been already mentioned above in replies at serial no.1 and 4.

1.1 Section 18 is also applicable to a bill of entry inasmuch as Section 20 of IGST Act makes it very clear that the provisions of CGST Act, shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act. Also

1.2 Rules 2 of IGST Rules says that CGST Rules apply in relation to integrated tax as they apply in relation to central tax.

Thus the provisions of CGST Act have been made applicable not only to (iv) Input Tax Credit but also to scope of supply , Composite supply etc -----------------mentioned at (i) to (xxv) of Section 20 of IGST Act. Section 18 is meant for availability of credit in special circumstances subject to the conditions prescribed under clauses (a), (b), (c), (d) and if the stock of imported inputs and capital goods is lying in the factory as mentioned in these clauses, the time bar limit mentioned under Section 16(4) shall also be applicable to the bill of entry vide which the said goods stand imported.

(2). Here it is irrelevant to correlate Rule 36 (1) & (2) with Section 18 of CGST Act. Rather, Rule 40 is relevant wherein clauses (a) (b) (c) & (d) of Section 18 has dealt with/referred to.

GSTR-2 has been deferred and the same has been replaced by GSTR 2A and ITC is auto reflected in 2A on the basis of tax paid invoices of the supplier while filing GSTR-1 by the supplier. In the case of bill of entry duty is not paid by supplier but paid by the importer himself. Duty paid in bill of entry can not be auto reflected in 2A because that is not paid by supplier but by the importer. Needless to say tax paid by the supplier in the invoice is reflected in 2A. The registered person avails ITC in GSTR 3B on the basis of bill of entry. GSTR 3B, being self assessed return it is the entire responsibility of the tax payer/registered person who takes credit whether on the strength of invoice or bill of entry. Emphasis is on Rule 40(e) of CGST Rules and Section 155 of CGST Act.

[Alkesh Jani]

Shri Kasturiji and Shri Sanjay ji,

My heartily thanks for extending your guidance, I agree that as per Section 20 of IGST and Rule 2 of IGST makes CGST Act and Rules applicable. As all the reply given directly or indirectly points to Section 18 and Rule 36. Moreover, Section 16(4) specifically mentions of Invoice or debit note (Invoice issued under Section 31 and debit note issued under Section 34)

Section 18 (1)(a) is for person who has applied for registration

Section 18(1)(b) is for who takes registration under Section 25(3)

Section 18(1)(c) is for person ceases to pay tax under section 10

Section 18(1)(d) is for supply which was exempted becomes taxable supply

Section 18(2) states that ITC under sub-section (1) of Section 18

The moot question is Rule 36 is for documentary evidence for claiming ITC and not for time limit. So now please let me know which particular provision of Act and/or particular Rule can be applied to Bill of Entry.

Thanks and with Regards

[KASTURI SETHI]

A -"I agree that as per Section 20 of IGST and Rule 2 of IGST makes CGST Act and Rules applicable."

B- "Let me know which particular provision of Act and/or particular Rule can be applied to Bill of Entry."

Dear Alkesh Jani Ji,

Above A conveys that you fully agree with the views expressed at serial nos. 1, 4, 9, 11 & 12 but B conveys that you do not agree with the above views and you are still after specific entry of the words," a bill of entry" in Section 16(4) as well as Section 18 of CGST Act. Hence contradiction in your stand.Replies to all your queries at serial no.13, are inherent in the replies at serial nos.1,4,9,11 & 12.

To cap it all, after such a lengthy discussion, if any person is still of the view that time bar limit prescribed under Section 16(4) is not applicable to the availment of ITC on the strength of a bill of entry, that person has two options :

(i) that that person must muster courage to take ITC on a bill of entry after September (in October) following the end of the financial year.; or

(ii) that person should opt for Advance Ruling Authority.

In the first option, SCN is dead sure to be issued.

Law is a common sense and common sense always prevails. I have expressed my views in a sportsman spirit and the sole purpose is healthy discussion.

[Alkesh Jani]

Shri Kasturiji,

Thanks for your reply. I agreed that provisions of CGST Act and Rules will be applicable for purpose of availing ITC of IGST, in terms of Section 20 and Rule 2 of IGST. This clarifies that for purpose of availing ITC of IGST one must follow the provisions of CGST Act and Rules. So question arises that which provisions of CGST Act and Rule is applicable for Bill of entry, of course I am not hunting for word “Bill of Entry” but seeking for provisions applicable to it. Section 16(4) and Section 18 are already discussed above.

Rule 40 (e) of CGST Rules mentions of Section 18 which is already given above moreover, it is also not applicable as the (foreign) supplier will not file GSTR-1 and importer is not the supplier in this case.

I welcome your suggestion that one may opt for availing or for advance ruling. Again it makes me think that which are the possible provisions of Act or Rule which department may invoke in SCN.

No doubt that I have raised the query for sake of knowledge and by way of healthy discussion every possible views can be explored which will benefit the public at large.

With Due Regards

[KASTURI SETHI]

Dear Sh.Alkesh Jani Ji,

"No doubt that I have raised the query for sake of knowledge and by way of healthy discussion every possible views can be explored which will benefit the public at large."

I fully agree with you on your above expression. You have ignited the discussion which is thought provoking.

[sunil bhageria]

Shri Sanjay Malohatraji/Kasturiji,

I am continuing the discussions just for the sake clarity and knowledge updation.

I am fully agree that section 20 & rule 2 of IGST act prescribes applicability of same rule to IGST as applicable to CGST means whatever provision written for CGST will apply to IGST. Section 16(4) of CGST prescribes time limit for availing input credit only for two documents i.e. Invoice or debit note hence the provision of CGST in respect of only these two documents will apply to IGST .Applicability of same provision of time limit on bill of entry is possible only if Bills of entry falls under definition of either Invoice or debit note.which I do not think is true as bill of entry is different from invoice or debit note.

Submitted for opinion of experts

[Alkesh Jani]

Shri sunil bhageriaji,

I think that it is wise to conclude this discussion as, it has reached its saturation level. The views expressed by our experts are as per the interpretation and applicability, that means we have two views

(1) Section 16(4) is applicable to Bill of entry for ITC, and we also have supporting grounds to it and

(2) Section 16(4) is not applicable to Bill of Entry for ITC, and we also have supporting grounds to it.

Therefore, as rightly advised by Shri Kasturji that if you are convinced that (1) above is applicable go for advance ruling and if you are convinced that (2) above is applicable, take ITC and contest SCN, which may be issued.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

You may or may not agree; it is your freedom as well as prerogative but it is certain that you have really understood what Sh.Sanjay Malhotra CS, Sir and myself wanted to communicate.Your last reply proves that you were not groping in the dark.

[CSSANJAY MALHOTRA]

Friends,

At the outset, consensus prevails across members in the present query that the provisions of Section 20 of IGST Act and Rule 2 of IGST Rules is to be read in context to respective sections / rules in CGST Act.

Issue of Querist is the “Restriction of time limit for availing ITC on Bill of Entry”, which again has been reiterated by Sh. Kasturi ji that “Yes” restriction applies besides referring to Section 20 of IGST and Rule 2 of IGST Rules. When the said provisions are referred to, it means that all the sections pertaining to Input Tax credit, returns, etc… has to be read alongwith. Am also in agreement with Sh. Kasturi ji that yes restriction applies till filing of return under section 39 for the month of Sep of next F.Y.

Section 16(4) should not be considered as standalone for restriction of ITC. Reason being is that the proviso to said section has limited applicability i.e. ITC is allowed on 2017-18 Invoices or Debit Notes pertaining to said FY invoices which have been uploaded by supplier in his GSTR-1 (specific mention in proviso – sub section (1) of Section 37… Accordingly the amendment to this effect was made in Section 37(3) also to allow supplier to add missing invoice/ debit notes in his GSTR-1. Proviso does not applies to Bill of Entry as the said document is not to be uploaded under Section 37 of CGST Act. To conclude, proviso is inserted for giving time extension in respect of missing invoices / debit notes pertaining to said missing invoices. Proviso also does not extend time limit to other invoices which are not part of sub-section 37(1) of CGST Act i.e. RCM….

Had the said sub-section 37(1) been specified in original para of Section 16(4) confusion would not have been there. Invoice can be read as “Invoice issued by Overseas Supplier also” by department considering section 2(24) of IGST Act or Section 2(120) of CGST Act. Bill of Entry is tax paying document and Invoice of overseas buyer pertains to supply of goods. Department should have made insertion in Section 16(4) of CGST Act that “Notwithstanding contained in sub-section (1) or Sub-section (2) …….

Please also go through Section 38(2), proviso to Section 38(5), 39(9), Section 42(1)(b) of CGST Act and you may reach to conclusion as contravention of same shall be part of SCN.

Note that one can’t avoid or look for extension provisions for scenarios where tax is paid under RCM / self as those cases can never be of missing invoices.

Sh. Kasturi ji with 30+ experience had been part of department and understands the Revenue perspective very well and guide taxpayers to always have word of caution from facing litigation. Sh. Alkesh Jani ji has also addressed this issue in past that same is not free from litigations. We, professionals don’t write law but explain same. Even Court also explains and their verdict attains finality.

Appreciate the members involvement in the present issue for deep understanding as until and unless you contradict or debate, nothing fruitful comes out.

[Pratik Trivedi]

Dear All,

I have gone through all the expert’s views and with due respect to all I would like to add my view point to the subject matter.

We had learned from various judicial canon that the legislature never waste its words and he knows what he writes and Expressio Unius Est Exclusio Alterius.

In the present context we must read Section 2(38), 2(66), 16(2)(a) and Section 16(4) of CGST Act, 2017 which reads as ;

Section 2(38) “debit note” means a document issued by a registered person under sub-section (3) of section 34;

Section 2(66) “invoice” or “tax invoice” means the tax invoice referred to in section 31;

Section 16(2)(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;5

Section 16(4) A 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……………..

On perusal of above provisions it could be observed that at one place of very same section legislature takes a pain to mention “such other tax paying documents as may be prescribed” and by the time he reaches the end of section he left out the very same words i.e. “such other tax paying documents as may be prescribed”.

There is a view that Tax on Import of goods are governed by the IGST Act and that’s why the Section 16(4) of CGST Act, 2017 doesn’t contain Bill of entry specifically there which personally doesn’t float my interpretation ideology. Further it’s to be apprehended that Tax on Import of Goods flows from Custom Tariff Act, 1975 which I have discussed in later part of this discussion.

In that regard I would like to mention that the concept of Bill of Entry is not alien to the CGST Act, 2017. Under the CGST Act, 2017 the ITC of Tax paid on import of goods i.e. IGST is allowed and in that regard we can refer to the Section 2(62)(a) of CGST Act, 2017 which reads as

"input tax" in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes ……..

(a) the integrated goods and services tax charged on import of goods;

and in order to allow such ITC under the CGST Act, 2017 the Section 16(2)(a) specifically make mention of the words “such other tax paying documents as may be prescribed” and accordingly spelt out at Rule 36(1)(d) of CGST Rules, 2017 the Bill of Entry or any similar documents as prescribe under the Customs Act, 1962 as one the documents eligible for availing the ITC.

Now let’s go to the Section 20(iv) of IGST Act, 2017 which provides that Subject to the provisions of IGST Act, 2017 and the rules made thereunder, the provisions of CGST Act, 2017 relating to Input Tax Credit shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act.

Under this circumstances the concept of the word “mutatis mutandis” needs quite deliberation to determine whether in the context of Section 16(4) of CGST Act, 2017 the same could be modified by importing and adding a new word and read as “any invoice or debit note or bill of entry………”

The rule of mutatis mutandis is a rule of adaption and allow the changes according to the context in the point of details and alteration to the words when necessary to suit the objective.

However in the present context the word “Bill of Entry" itself holds an equal important under the CGST Act, 2017 and in spite of that fact the same have been ignored under Section 16(4) of CGST Act, 2017 which could be unintended drafting error but such errors could not be rectified in guise of mutatis mutandis under the IGST Act, 2017. The concept of mutatis mutandis cannot extend the scope and power beyond the one originally envisaged under the referred legislation. Section 20 of IGST Act, 2017 cannot get a better title than what is held by 16(4) of CGST Act, 2017.

Further the tax on import of goods is being levied under the Section 3(1) of Custom Tariff Act 1975 let us review the levy under IGST Act, 2017 in the context of import of goods which reads as under ;

Section 5(1) of IGST Act, 2017 - Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:

Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

Now let’s review the Section 3(7) of the Custom Tariff Act, 1975 which reads as ;

Section 3(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent. as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8)."

If we would compare the same with Section 3(1) of Custom Tariff Act, 1975 which reads as ;

"Section 3(1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article:”

then we would appreciate the fact that the very difference in both above provisions are that unlike Section 3(1) the levy of IGST under Section 3(7) is itself a levy and not any equivalent to other taxes or duty.

So according to me and to the best of my understanding and knowledge the school of thought that the barriers of time limit for availing the ITC under Section 16(4) of CGST Act, 2017 doesn’t apply in case of Import of Goods for the very reason that same doesn’t find any mention therein. This is my personal views and I respect absolutely views of all the scholars.

This could be an unintended drafting error but that won’t change the consequences. I would like to quote Oliver Wendell Homes Jr once said in his court “This is a Court of Law and not a Court of Justice” which I believe to be in line with literal interpretation which may have harsh consequences on either side.

[Vishal Garge]

I agree with Mr. Prateek.

[Raghavendra Rao]

@Pratik Trivedi - Brilliant analysis.

[SAURABH DIXIT]

I agree with @pratik. In fiscal law, there is no scope for intendment. Someone rightly stated that IGST paid on import is a customs duty, which is allowed as ITC under GST law. IGST Act merely suggests which GST to be paid on import, i.e. igst or cgst/sgst. That is the limited role, according to me. Also, when a restriction is created in law (itc to be taken within specified time), the embargo is attracted only when the subject falls within four corners thereof and not through any indirect analogy. If Section 16(4) specifically uses term Tax invoice / Debit Note, and since there is no deeming fiction in law which states that BE is nothing but Tax Invoice or Debit Note for GST law purposes, one has to consider the embargo to be inapplicable to BE. Of course, during erstwihle CCR, 04 regime, there are case laws which state that Rule 9(1)(b) embargo (not availablity of credit in case where differential duty paid due to fraud, supression etc) applies even when credit is availed on BE, apart form supplementary invoice, however, present issue stands on a different footing, and with differently worded text in statute.

In a nut shell, unless law specifically states so, time limit to take ITC should not legally apply to ITC avialed on BE, since it is not Tax invocie or Debit Note.