ITC on freight, Goods and Services Tax - GST

[AMIT BATHAM]

Honorable colleagues, one of my clients paid for freight in 2017–18, but he failed to pay the GST. The department has now sent him a notice about the GST on the freight he paid for in 2017–18. My inquiry is whether he can claim the ITC in his current period return if he pays now, following the notice served under Section 73. In my view, he can claim because as per sec 16 (3) no ITC availed in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of fraud or will full misstatement or suppression of facts

Posts / Replies

[KASTURI SETHI]

Dear Querist,

Such availment of ITC for the year 17-18 is hit by time limitation prescribed under Section 16(4) of CGST Act.

Although Section 73 of CGST Act is not mentioned under Section 17(5)(i) for blocked credit yet ITC is hit by Section 16(4). Here the basic document required is an invoice prescribed under Rule 36 (1) (a) & (b) of CGST Rules, 2017 and Section 16(4) contains the words, 'any invoice'.

Section 73 was not required to be included in Section 17 (5) (i) as such credit is already hit.

Disclaimer : These are my personal views for education purpose and not for legal proceedings in any court.

[Padmanathan Kollengode]

Dear querist,

1. whether freight corresponds to GTA or not?

2. whether suppliers are registered or not?

[Shilpi Jain]

By GTA - Mr. Padmanabhan means whether he is a transporter who has issued a consignment note for the transaction of transportation of goods.

[AMIT BATHAM]

No, he is not a transporter; he is simply a consignee who paid freight on inward supplies against a consignment note. The question is if he pays GST on freight for the year 2017-2018 under reverse charge in 2023-24 after SCN, can he claim ITC in the current period?

[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.

(iii) Also peruse the replies of the experts in respect of Issue ID no.118838.

[Padmanathan Kollengode]

Dear Amit Batham,

There is also a contrary view that ITC is eligible for RCM paid on the basis of self-invoice under section 31(3)(f) issued in 2023-24 even though supply pertains to 17-18. This is because:

A. "Any invoice or debit note for supply" Section 16(4) does not apply to self invoice as self-invoice u/s 31(3)(f) is issued in respect of goods or service received. B. Section 16(4) pertains to date of invoice and not date of supply. This view of course has to be litigated before the authorities and high Forums.

Both the views has been elaborately discussed at length by experts in the issue ID mentioned by Ld. Kasturi Ji above.

You may peruse both views to take an informed decision which is finally based on your risk appetite, amount involved, facts of case, litigation cost invoiced vs benefits etc.

[Amit Agrawal]

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

A. As your client have not paid subject taxes under RCM u/s 74, blockage of ITC u/s 17(5)(i) is not the issue under consideration here. I am further presuming that the supplier was not registered under GST when subject services were received by your client in FY 17-18 and that your client have raised invoice u/s 31(3)(f) (lets say, in Sept, 2023) & paid subject tax-liability under RCM immediately thereafter. I am also presuming that your client 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".

B2. The words 'any invoice' used in Section 16(4) 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'. One cannot interpret Section 16(4) as if the words 'for supply of goods or services or both' does not exist there.

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 with the legal proposition that this restriction u/s 16(4) 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 your client 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.

[Amit Agrawal]

In continuation of Para C, C1, C2 & Para D from our above post at serial No. 7, 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.