Query regarding Section 16(4) of CGST Act, Goods and Services Tax - GST

[Jasbir Uppal]

Dear Professionals,

That the applicant firm has filed GSTR-3B for the month of Feb. 2020 Dated 23/10/2020 and turnover was below rupees five crore, and as per Notification No. 29/2020 – Central Tax New Delhi, the 23rd March, 2020 for taxpayers having an aggregate turnover of up to rupees five crore rupees in the previous financial year, whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi, the return in FORM GSTR-3B of the said rules for the months of April, 2020 to September, 2020 shall be furnished electronically through the common portal, on or before the twenty fourth day of the month succeeding such month.

Therefore, my query is the last date for GSTR 3B submission and last date for ITC claim will be considered as 24th Oct 2020 or 20th Oct 2020 as per aforementioned notification ?

Thanks & Regards

J S Uppal

Advocate

Posts / Replies

[Shilpi Jain]

The time limit for availing credit is governed by section 16(4) of the CGST / SGST Act.

The above notification is for extending the time limit for filing returns. So the above notificaiton does not extend time limit to avail credit

It is only if there is an amendment in 16(4) that there would be an extension of time limit.

[KASTURI SETHI]

Dear Sir,

My views are as under :-

In order to arrive at last date for availing ITC, three parameters were laid down in Section 16 (4) of CGST Act (Prior to amendment i.e. before 1.1.21).

1. The date of invoice or the date of debit note (the date of debit note was delinked from the date of invoice/document w.e.f. 1.1.21)

2. The date of filing monthly return under Section 39

3. The date of filing Annual Return

Section 16(4) of CGST Act as remained in force during the period from 1.7.2017 to 31.12.2020

(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 :

Emphasis is on the phrase, "whichever is earlier".

Return for February, 20 was filed on 23.10.2020.

Hence last date for availing ITC will be 24.10.2020

[Alkesh Jani]

Respected Shri Kasturiji Sir and all the Experts,

In this regard I have few queries, the Section 16(4) is conditional and is required to be satisfied and is not violative of constitution of India, as held by Patna High Court.

The section 16 (4) is as follows:-

“(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”.

Now my queries are as under:-

(i) a registered person shall not be entitled to take input tax credit in his books of account or in his electronic credit ledger?

(ii) Returns are to furnish by declaring the details, i.e. whatever is in books of accounts. by filing GSTR-3B is the only way to take credit in the Electronic Credit ledger, by filing returns belatedly, do I have to declare the ITC taken in books of Account and then to reverse the same.

(iii) By paying late fees return can be termed as invalid?

The above is for knowledge purpose only and Thanks in advance.

With Regards

[Jasbir Uppal]

Dear Professional,

Thanks for your valuable views, but in continuation with my query is as appended below:-

"The return under Section 39 of CGST Act, 2017. Even though we have filed return belatedly we have paid late fees and by paying late fee, our delay in filing return has been regularized - Mr Rashmikant Kundalia vs Union of India 2015 (2) TMI 412 - BOMBAY HIGH COURT, Howrah Taxpayers' Association Vs. The Government of West Bengal and Anr. 2010 (12) TMI 1274 - CALCUTTA HIGH COURT. Hence, once the delay has been regularized such returns has to be construed to be filed within the due date. With respect to restrictions specified under Section 17, we submit that we have not availed any of the restricted credit."

Thanks & Regards

J S Uppal

Advocate

[Padmanathan Kollengode]

Dear Alkesh Ji and Advocate J S sir,

The issue of late fee regularizing return has been considered by Hon'ble High Court of Andhra Pradesh in Thirumalakonda plywood - 2023 (7) TMI 1226 - ANDHRA PRADESH HIGH COURT case i context of 16(4). Para 20 is relevant:

20. Then the next contention of the petitioner is that since Form GSTR-3B return of March, 2020 filed on 27.11.2020 by the petitioner was accepted with a late fee of Rs.10,000/-, such acceptance will exonerate the delay in filing return U/s 16(4) and therefore along with his return, the ITC claim shall also be considered. In our considered view this argument holds no much force for the reason that the conditions stipulated in Section 16(2) and (4) are mutually different and both will operate independently. Therefore, mere filing of the return with a delay fee will not act as a springboard for claiming ITC. As rightly argued by learned Advocate General, collection of late fee is only for the purpose of admitting the returns for verification of taxable turnover of the petitioner but not for consideration of ITC. Such a statutory limitation cannot be stifled by collecting late fee. 

[Padmanathan Kollengode]

For the original query, I am of the view that return for Feb 2020 is within the "due date for return for the month of September" i.e return for Sept 2020, which as per notification you have mentioned is 24th Oct.

[Padmanathan Kollengode]

I am of considerate view that amendment made to section 16(4) from "due date of return for the month of September" to "30th day of November" should be retrospective from 1-7-2017. If that be the case, many would get relief. 

[KASTURI SETHI]

Sh.J.S.Uppal Ji,

With reference to query at serial no.4 above, such provision/ situation is in Income Tax Act/Rules and NOT  in GST Acts.

[KASTURI SETHI]

The judgement of Andhra Pradesh High Court in the case of Thirumalakonda Plywoods Vs. A.C. State Tax - 2023 (7) TMI 1226 - ANDHRA PRADESH HIGH COURT is, inter alia, based on the judgement of the Supreme Court in the case of Ald Automotive Pvt. Ltd. Vs. Commercial Tax Officer reported as 2018 (10) TMI 814 - SUPREME COURT wherein the use of word, 'shall' has been explained and time limit has been discussed in detail.

Hence there is not even remote possibility of taking ITC beyond the time limit prescribed under Section 16(4) of CGST Act with the crutch of late fee.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

My views are as under :

i) a registered person shall not be entitled to take input tax credit in his books of account or in his electronic credit ledger ?

Ans. Books of Accounts are statutory records. The foundation for taking ITC is the books of accounts. The Common Portal System is also under Section 146 the CGST Act. There is no complete harmony between the GST Acts and the Common Portal System (GSTN). Therefore, my answer is the Books of Accounts first for taking ITC. Books of accounts are base.

(ii) Returns are to furnish by declaring the details, i.e. whatever is in books of accounts. by filing GSTR-3B is the only way to take credit in the Electronic Credit ledger, by filing returns belatedly, do I have to declare the ITC taken in books of Account and then to reverse the same.

Ans. Yes

(iii) By paying late fees return can be termed as invalid ?

Ans. Return cannot be treated is not invalid. Time barred ITC cannot be regularized by paying late fee. Late fee is punishment. For more details, pl. go through the judgement of Andhra Pradesh High Court in the case of Thirumalakonda Plywoods reported as 2023 (7) TMI-1226 based on the Supreme Court judgement.

Looking forward to your response. Your views matter a lot for me. I am always flexible.

[Alkesh Jani]

Respected Shri Kasturiji Sir,

In this regards, I am of the view that two High Courts has expressed the same views for Section 16(4) of CGST Act, 2017, one is Gobinda Construction by Patna High Court and another is Thirumalakonda plywood by Andhara Pradesh High Court, and both are in favour of Revenue therefore, department will not file any appeal before the  Apex court.

If any Party aggrieved may appeal before Hon’ble Supreme Court of India and if the contrary view is taken by Supreme court of India, then we can say that issue is settled. As of Now, the views taken by the Hon’ble High courts are to be followed.

Further, I fully agree with your reply to point No.(i) that common portal should be such that ITC cannot be taken, but if common portal is allowing to taken the ITC is matter of concern. For Point No.(iii) I do not agree that late Fees are punishment, as there may be unavoidable circumstances, for which a taxpayer may miss the due date, for such circumstance, the Taxpayer should not be penalised. For this purpose the observation made by Hon’ble High court of Gujarat is as under:-

“Before parting, the court deems it fit to caution the concerned authorities that while exercising powers under section 83 of The GGST Act, the authorities should try to balance the interest of the Government revenue as well as a dealer to ensure that while the interest of the revenue is safeguarded, the dealer is also in a position to continue with his business, because it is only if the dealer continues with the business that he would generate more revenue. The authorities should keep in mind that bringing the business of a dealer to a halt does not in any manner serve the interest of the revenue.”

Ambiguity regarding taking ITC in electronic credit ledger or in books of account is still prevailing, of course the Section 16(2) starts with “Notwithstanding”  therefore, it has overriding effect over Section 16(1) which states that credit can be taken and will be credited in electronic credit ledger. The law maker may have made this provision under section 17(5) if that was the intention.  

Thanks,

With Due Regards,

[Amit Agrawal]

I concur with the views of Shri PadmanathanJi in his posts at serial No. 6 & 7 above. 

Attention is invited to the following Para from a recent decision from SMB of Kelara High Court in case of M/s. M.TRADE LINKS & others - 2024 (6) TMI 288 - KERALA HIGH COURT wherein it is held as follows:

"100. Prior to the amendment in Section 39 by the Finance Act 2022, the date for furnishing the return under Section 39 was 30th September. Considering the difficulties in the initial stage of the implementation of the GST regime, its understanding, and compliance, the Legislature effected the amendment and extended the time for filing the return for September to 30th November in each succeeding Financial Year.  The amendment is only procedural to ease the difficulties initially faced by the dealers / taxpayers.  Therefore, where for the period from 01.07.2017 till 30.11.2022, if a dealer has filed the return after 30th September and the claim for ITC was made before 30th November, the claim for ITC of such dealer should also be processed if he is otherwise entitled to claim the ITC.  It has been pointed out in several cases which are pending before this Court that the claim was made before 30th November of the succeeding Financial Year, but the relevant period was 20th October, which was the extended date for furnishing the return under Section 39 for the month of September.  Therefore, if a person has furnished the return for the month of September till 30th November, their claim should also be considered and processed and should not be rejected if the dealer did not furnish the return for the month of September on or before 20th October.  This amendment being procedural has to be given retrospective effect and, therefore, it is provided that it should be treated that the time limit for furnishing the return for the month of September is 30th November in each Financial Year with effect from 01.07.2017, considering the peculiar nature of difficulties in the initial period of implementation of the GST regime.  So far as the challenge to the constitutional validity of Section 16(2)(c) and Section 16(4) is concerned, the same is rejected." 

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