QUESTION

Reversal of ITC pertaining to FY 2018-19 while filing return of September 2019? ITC which was not reflecting in GSTR 2A was reversed while filing September 2019-3B return and same is reclaimed as & when got reflected in GSTR 2A.? Section 16 (4) of CGST Act, 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. It means that whatever ITC pertains to FY 2018-19 is to be claimed while filing return of September 2019 otherwise taxpayer looses entitlement to claim that ITC i.e. any ITC pertaining to FY 2018-19 is not to be claimed after September 2019. This section is interpreted wrongly as taxpayer is required to reverse ITC if it does not reflects in GSTR 2A by September 2019. So treatment of reversing ITC and claiming back as and when reflects in GSTR 2A after September 2019 is wrong & leads to loss of ITC which is reversed.

ANSWER

Facts of the case:  ITC which was not reflecting in GSTR 2A was reversed while filing September 2019-3B return and same is reclaimed as & when got reflected in GSTR 2A. Whether time limit given under Section 16 (4) of CGST Act is applicable in case of reclaim of credit i.e. ?

Law Applicable:
 SECTION 16 OF CGST ACT
(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.

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 or invoice relating to such debit note for supply of goods or services or both 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.

CGST RULE 37

(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for reavailing of any credit, in accordance with the provisions of the Act or the provisions of this Chapter, that had been reversed earlier.

Interpretation: The law is restricting claiming of credit. Once credit is taken and reversed and  thereafter reclaimed after some event take place is not covered under this law.
Reclaim of credit in case the reversal is made under Rule 37 when payment is not made in 180 days is not hit by the time limit given in section 16(4) as per sub rule (4) of Rule 37.

Conclusion: Time limit specified under section 16(4) for claiming of credit is not applicable in case of reclaiming of credit

Thus you can reclaim credit for FY 2018-19 after September 2019

Ask a Question Further reply 1638

Further to our reply dated 13.08.2020
A second approach can also be taken in this case the same is as follow

The question of recredit may arise only if the first credit is lawful . Credit taken at the very first time is unlawful because the credit is available to the registered person only if the same is reflected in the GTSR 2A If the credit is taken without it is showan 2A then it is inadmissible credit so question of recredit does not arise

We have to take a practical approach and form our strategy accordingly. Following are different practical situations and solution for the same

Case One

You have not made payment to the supplier or have regular business with him so you may recover it from the supplier. If this is the case then deduct payment from the supplier and not avail credit or reverse it ,as the case may be

Case Two

If this is cost to you and can't be debited to the supplier then go for litigation.
From the natural justice point of view inadmissibility of the ITC is unlawful. If payment is made for bonfire supply then it is always assumed that supplier will discharge his tax liability .If the supplier is not discharging his tax liability tax then it is duty of his jurisdictional GST officer to recover tax from him because he is holding the due amount Sooner or later this legal provision will be challenged in the court of law by other parties also and will be decided in favors of assesses

These type of cases are already decided in VAT regime .If the buyer is making payment to the seller for bonafide purchase then he can avail credit of it even if the seller has not deposited tax  (Reply dt.13.08.2020)