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Is there a time limit to avail ITC of GST paid under Reverse Charge? PART-II
By K Srinivasan
Aug 08, 2020

THE new Proviso under Sec 16(4)

A proviso was inserted under Section 16(4) ibid, with effect from December 31, 2018, to extend the time-limit to avail ITC for the period July 2017 to March 2018.

The proviso is reproduced hereunder:

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice … made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019."

The emphasis in the aforesaid proviso clearly lays down that the extension of time-limit to avail ITC is available only if all the following conditions are satisfied:

The invoice(s) should

1. Pertain to the period July 2017 to March 2018; Such invoice(s) should be uploaded by the supplier in GSTR-1; and

2. Such invoice(s) should be uploaded on or before the due date of ling GSTR-1 for March 2019.

3. It should be noted that ‘uploading of invoices' as aforesaid is distinct from ‘furnishing of serial numbers of invoices' issued during a tax period in the common portal under Rule 48(3) of CGST Rules.

Since uploading of invoices by supplier practically happens only in case of forward charge, it is evident that the lawmaker has intently drafted the proviso with a view to extending the time-limit to avail ITC under forward charge only, between July 2017 and March18.

This also highlights the risk for taxpayers who availed ITC between October 2018 and March 2019 of tax paid under reverse charge for the period July 2017 to March 2018.

The relevant extract of Para (g) of the Press release by the Government reads as follows:

Many taxpayers have requested for clarification on the appropriate column or table in which tax which was to be paid on reverse charge basis for the FY 2017-18 but was paid during FY 2018-19.

It may be noted that since the payment was made during FY 2018-19, the input tax credit on such payment of tax would have been availed in FY 2018-19 only.

Therefore, such details will not be declared in the annual return for the FY 2017-18 and will be declared in the annual return for FY 2018-19. …

However, the press release remains silent whether it means the first half-year or the full year of 2018-19 despite stating that GST paid under reverse charge can be claimed as ITC during the financial year

A repeated question from taxpayers who belatedly paid GST under reverse charge would be whether ITC can be claimed in any other tax period in which RCM self-invoice is issued.

For example, reverse charge liability arose (for goods or services received) during 2018-19, can the RCM self-invoice be issued in October 2019 and ITC be claimed thereafter?

Strangely enough, GSTR-1 captures the details of outward Supplies underSl.No.2 of Table 13 titled "Documents Issued" therein captures the details of invoices issued for inward supply from unregistered person. That is, the serial numbers of RCM self-invoices should also be entered therein.

In this context, it is pertinent to refer to the proviso to section 37(3) ibid, which reads that: "Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the Financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier:

Section 37(1) ibid mandates filing of GSTR-1, which is prescribed as part of the CGST Rules. Hence, from the said proviso, it can be inferred that rectification of any omission in GSTR-1, of the period 2018-19 is allowed only up to earlier of the following dates: (i) date of filing GSTR-3B of September 2019; or

(ii) date of filing GSTR-9 of 2018-19.

It would also appear that the aforesaid time limit does not apply to RCM self-invoices since:

(i) Section 37(1) ibid applies only to details furnished in GSTR-1, which are communicated to the recipient; and

(ii) that RCM self-invoice is not communicated to the recipient.

However, it is well known that even details related to B2C and export invoices furnished in GSTR-1 (which are not communicated to recipients) cannot be edited beyond the said time limit.

Hence, it appears that the proviso to Section 37(3) ibid applies to all details furnished in GSTR-1, whether communicated to the recipient or not. Also, under the self-assessment regime, it is not feasible to expect that error or omission in GSTR-1 to be rectified regardless of time limit.

In view of the above, any omission to include the serial numbers of RCM self-invoices for goods and services received in 2018-19 cannot be rectified beyond the date of ling GSTR-3B of September 2019, since GSTR-9 for 2018-19 could not have been filed before such date.

In fact, non-reporting of serial numbers of RCM self-invoices in GSTR-1 could be viewed as non-compliance of Rule 36(1) ibid, resulting in disallowance of ITC arising from such unreported RCM self-invoices.

Hence, belated issue of RCM self-invoice i.e beyond the period stipulated under the above law may impact ITC eligibility adversely.

Whether any time limit is prescribed for issuing such RCM self-invoice?

A close look at Section 31 ibid indicates that time limit has been prescribed for raising: (i) tax invoice by the supplier of goods / services; (ii) revised invoice; (iii) receipt voucher; (iv) payment voucher; (v) invoice in case of continuous supply of goods or services; and (vi) invoice in case of goods sent or taken on approval for sale or return.

In this context, the loose drafting of Section 31(3)(f) ibid throws two possibilities: whether RCM self-invoice should be issued

a) On the date of receipt of goods and services from unregistered supplier; or

b) When goods and services are received from a supplier, who is unregistered on the date of receipt of goods and services.

However, given the background of Section 31 ibid, which details the time limit within which various documents prescribed under law are required to be raised, it would appear that RCM self-invoice should be issued on the date of receipt of goods / services from unregistered supplier.

The standard defence of trade that ITC is a vested right and non- observance Procedures can't take away such right to credit vested in them

The next question in line is when ITC is broadly understood to be a vested right of the tax payer, can it be restricted on the grounds of non-compliance of certain procedures which are highly unclear to the Government and tax payers alike.

It is relevant in this context to refer to the SC decision in ALD Automotive Private Limited v. Commercial Tax Officer – [2018] 99 202 (SC) – where it was held in favour of the Revenue that conditions (including time limit) can be imposed for claiming ITC.

End Note

In view of the foregoing, it appears that ITC of GST paid under reverse charge should be claimed within the time-limit specified under the main clause of section 16 sub-section (4) ibid.

As a consequence, if the taxpayer had belatedly filed GSTR-3B of September 2019 (claiming ITC pertaining to 2018-19, whether Under forward or reverse charge), the right to reject such claim can't be strictly ruled out, in the humble view of the Author.

[The Author is a former Assistant Commissioner of GST, Chennai and a CBIC Master Trainer, GST and currently a Senior Associate, Indirect & Corporate Taxes, at a Chennai-based Law Firm, RANK Associates. The views of the Author are purely personal.]

See Part-I