Section 16(5) & (6) of CGST- A gesture of relief
Under the whole concept of GST, the
input tax credit can be said the main area of the consideration of the taxpayer
as well as the GST department. Now a days, there are various measures which are
initiated by the department to keep an eye to check the compliances of ITC for
example introduction of opening balance of ITC credit reversal & reclaim
statement, Introduction of RCM Liability/ITC Statement etc. Similarly, some
relaxations are also provided in respect of claim of input tax credit. The
proposal for insertion of sub section (5) & (6) in
section 16 of CGST Act 2017
is one of them. In this article we will discuss the provisions of
section 16(5)
& (6) of CGST Act 2017 which are yet to be notified.
Section 16 of CGST Act contains the provisions relating to the eligibility and
conditions for availing the input tax credit. The sub section 4 of section 16
states that 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 30th November following the end of F.Y to which such invoice or
debit note pertains or furnishing of the relevant annual return, whichever is
earlier.
This period was extended further for the financial year 2017-18 by inserting a
proviso under section 16(4), thereby allowing the further extended period till
the filing of GSTR-3B
u/s 39 for the month of March, 2019.
However, some times the taxpayer avails the input tax credit in respect of
certain invoices or debit notes even after the time period specified in
section
16(4) of CGST Act 2017 and the department thereafter initiates the recovery
proceedings against those taxpayers and ask the taxpayers to reverse such ITC
along with interest and penalty. In such situation the taxpayers have no other
option available with them to defence their case, hence they have to reverse the
input tax credit which was availed by violating the provisions of
section 16(4)
of CGST Act 2017.
The GST Council in its 53rd meeting proposed amendment in
Section 16 that the
ITC on the invoices and other eligible documents for availing such ITC for the
FY 2017-18, 2018-19, 2019-20 and 2020-21 may be allowed up to 30.11.2021. The
Finance Minister has also proposed in the Finance Act 2024 vide
section 118 of
Finance Act 2024, the Insertion of new sub sections in
Section 16 of CGST ACT.
The proposal was to insert new sub-sections 16(5) and (6) after sub-section (4)
of Section 16 in the CGST Act 2017, thereby intending to regularize the Input
Tax Credit taken after the limitation period as prescribed in
Section 16(4) of
the CGST Act, 2017.
In the recent council meeting i.e,
54th the GST council has again recommended
that section 118 and
150 of the Finance (No. 2) Act, 2024, which provides for
insertion of sub-section (5) and sub-section (6) in
section 16 of CGST Act, 2017
retrospectively with effect from 01.07.2017, may be notified at the earliest.
The provisions of said sub sections are summarised as follows;
Sub section 5 of section 16 of CGST Act 2017 states that in respect of an
invoice or debit note for supply of goods or services or both pertaining to the
Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person
shall be entitled to take input tax credit in any return u/s 39 which is filed
up to 30.11.2021.
Further, as per sub section 6 of
section 16 of CGST Act 2017 where the GST
registration is cancelled u/s 29 and subsequently the cancellation of
registration is revoked, the said person shall be entitled to take ITC in
respect of such invoice or debit note, in
GSTR-3B,
(i) filed up to 30th November following the F.Y to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or
(ii) for the period from the date of cancellation of registration or the
effective date of cancellation of registration, as the case may be, till the
date of order of revocation of cancellation of registration, where such return
is filed within 30 days from the date of order of revocation of cancellation of
registration,
whichever is later.
Thus from the above detailed discussion we can conclude the following;
Conclusion: The proposed insertion of sub section (5) & (6) of section 16 of CGST Act 2017 is made to provide a relief to the taxpayers, by allowing the ITC in respect of any invoice or debit note issued during F.Y 2017-18 to 2020-21 till 30.11.2021. Also a recommendation has been made to allow revision of the order of old cases by allowing the ITC.
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.