ITC for the past period, Goods and Services Tax - GST

[Kaustubh Karandikar]

Based on GST Intelligence wing show cause notice, GST under reverse charge paid towards import of service from the year 2017 to 2023 in the month of September 2023. Can ITC be availed against this payment made for the past period now?

Posts / Replies

[Ganeshan Kalyani]

Sir, Sec 16(2)(a) states as "(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;

The above is one of the conditions to claim ITC. Now in case of import of service there is no tax invoice. So it does not fall in the above section. In my view you can claim ITC.

[KASTURI SETHI]

Dear Sh.Ganeshan Kalyani Ji,

What do you think about the meaning, essence and scope of expression, "or such other tax paying documents " here ?

Just for my knowledge sake please.

[Shilpi Jain]

In case of import of services, the liability would be under RCM for services received from an unregistered person. This will require issuance of a self-invoice. Credit in my view should be available if you are issuing a self-invoice now on present date.

Similar issue has already reached the HC in the case of 2023 (10) TMI 859 - KARNATAKA HIGH COURT M/S. TOYOTA KIRLOSKAR MOTOR PVT. LTD. VERSUS UNION OF INDIA

Petitioner paid IGST under RCM on payments made to seconded employees/ related entities considering the decision of the SC in the case of Northern Operating Systems and availed credit.

Adjudication of SCN stayed.

[Shilpi Jain]

So you could consider taking the credit and not using it until favourable decision in this regard

[Kaustubh Karandikar]

Shilpi ji and other experts thanks for the reply. As per Rule 47 of the CGST Rules, 2017, the self-invoice is required to be issued within 30 days from the date of supply of service. Since this condition is not getting satisfied since the actual services are received from 2017 onwards for which self - invoice is issued in 2023, the credit may get denied on this technical ground. Your views please.

[Amit Agrawal]

In my humble view (all arguments should be treated as without prejudice to each other):

A. I am presuming that you have not paid subject taxes under RCM u/s 74. And if so, blockage of ITC u/s 17(5)(i) is not the issue under consideration here. I am further presuming that that you have raised invoice u/s 31(3)(f) in Sept, 2023 while paying subject tax-liability under RCM. I am also presuming that you are entitled for 100% of ITC so claimed and Rule 42 & 43 are not in the picture here.

B. Time-limit u/s 16(4) of the CGST Act, 2017 does not apply to ITC availed against "an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31" of the recipient of goods / services.

B1. Section 16(4) deal with 'input tax credit in respect of any invoice or debit note for supply of goods or services or both' whereas invoice u/s 31(3)(f) deals with ''an invoice in respect of goods or services or both received by a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 from from the supplier who is not registered on the date of receipt of goods or services or both"

C. Delay in issuance of invoice u/s 31(3)(f) cannot be used as reason to deny ITC using restrictions u/s 16(4). Section 16(4) is concerned about 'Date of invoice / debit note' and NOT the timing of underlying supply. The words used in Section 16(4) (i.e. following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier) needs to be seen in this context,

C1. Above-said the intent of law is duly made clear in the Memorandum explaining the Finance Bill, 2020 states that "Clause 118 of the Bill seeks to amend sub-section (4) of section 16 of the Central Goods and Services Tax Act so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit.

C2. Thus, since beginning i.e. 01.07.2017, time-restrictions u/s 16(4) in respect of any invoice was time-limit calculated from date of invoice when it was issued and NOT from "the date when such invoices was ought to be issued on account of 'time of supply provisions' read with Section 31, rule 46 & 47 & so on OR actual invoice date, whichever is earlier".

D. Availment of ITC against invoices issued u/s 31(f)(3) is always 'subject to payment of taxes' as per Rule 36(b) read with Section 16(2)(a). And as the assessee has paid these taxes only in Sept, 23 after raising invoices u/s 31(3)(f) in Sept, 23 only, he is entitled to avail ITC only in Sept, 23 or there-after. Restrictions u/s 16(4) needs to be seen in this context even though I agree that this restriction is in addition to 'conditions prescribed u/s 16(2)' to avail ITC. This is because date of invoice u/s 31(3)(f), month when taxes were paid under RCM and earliest date of eligibility to avail ITC was Sept, 2023 only and NOT earlier.

In summary, I hold a view that you are entitled to avail ITC in subject situation under discussion here read with presumptions taken in Para A above.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

(i) Section 16(4) of CGST Act talks of 'any invoice'. The word, 'any' dictionarily means 'all' or 'every' or 'some' or 'one'. Thus in this situation we can deduce that the word, 'any' includes 'self invoice' also.

(ii) Nobody has authority to change the meaning and essence of any word which has been accepted internationally on the basis of legal dictionary.

[Amit Agrawal]

IMHO, the words 'any invoice' cannot be equated with 'each & every type of invoice' specially when same are followed by the words 'for supply of goods or services or both' u/s 16(4). One cannot interpret Section 16(4) as if the words 'for supply of goods or services or both' does not exist there.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

In continuation of Para C, C1, C2 & Para D from our above post at serial No. 6, attention is invited to Para 2.7 from Circular No. 211/5/2024-GST dated the 26^th June, 2024, wherein CBIC, in exercise of its powers conferred under section 168(1) of the CGST Act, has clarified as follows:

"2.7 Accordingly, it is clarified that in cases of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism (RCM) and where invoice is to be issued by the recipient of the supplies in accordance with section 31 (3) (f) of CGST Act, the relevant financial year for calculation of time limit for availment of input tax credit under the provisions of section 16 (4) of CGST Act will be the financial year in which the invoice has been issued by the recipient under section 31 (3) (f) of CGST Act, subject to payment of tax on the said supply by the recipient and fulfilment of other conditions and restrictions of section 16 and 17 of CGST Act. In case, the recipient issues the invoice after the time of supply of the said supply and pays tax accordingly, he will be required to pay interest on such delayed payment of tax. Further, in cases of such delayed issuance of invoice by the recipient, he may also be liable to penal action under the provisions of Section 122 of CGST Act."

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Please see discussion under Issue Id: - 117652