QUESTION

Mr. A has received Capital goods from X vendor dated 24.08.2018 i) Capital goods received vide Tax Invoice dated 24.08.18 ii) Advance payment to vendor in Feb’18 iii) ITC claimed in Sept’18. iv) Reco done with 2A in Sept’20. v) Since he observed mismatched with 2A, ITC reversed suo-motu in May 21 through DRC-03 vi) In Oct’20 reply received from vendor stating that mistake happened at their end as transaction was reported as B2C instead of B2B. vii) No amendment was done by the vendor since last days already crossed. Capital goods capitalized in his books without GST component. Whether he is eligible to re-take ITC which was reversed in May-21 due to vendor Invoice uploaded in B2B instead of B2B.

ANSWER

Facts of the case:
ITC for capital goods received in August 2018 was taken in September 2018. But the same was not reflected in GSTR 2A.

Law Applicable:
As per rule 36(4) of CGST rules
;
      "(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been furnished by the suppliers under sub-section (1) of section 37,in FORM GSTR-1 or using the invoice furnishing facility shall not exceed 5 percent of the eligible credit available in respect of invoices or debit notes the details of which have been furnished by the suppliers under sub-section (1) of section 37."

Interpretation:
The introduction of Rule 36(4) was made vide notification 49/2019 dated 9/10/2019. This amendment makes it imperative that ITC must be reflected in GSTR 2A before it can be claimed by the buyer. However it is important to note that this is a prospective amendment which came into force with effect from 09/10/2019 and not a retrospective amendment. Meaning that this rule applies to ITC taken on and after 9/10/2019. Therefore in your case where the ITC relates to September 2018, Rule 36(4) is not applicable. Therefore reversal of credit was not required.
However you have done the reversal in May 2021 and now you wish to reclaim the ITC.

Section 16 governs the law regarding claiming the ITC and subsection (4) is laid as under;
"(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 debit note pertains or furnishing of the relevant annual return, whichever is earlier."

It is evident from above that the time limits to claim the said ITC have passed therefore it can not now be claimed.

However, the tax was paid to the government by the supplier and you are eligible to claim the ITC having a valid invoice. Reversal was done when it was not required by the law. The legal remedy for you now is to claim a refund of the amount paid through DRC-03. The claim can be filed under the grounds as laid under section 54(8)(e) of CGST. The refund application is expected to face litigation in process and therefore it is recommended that you proceed with this only if the amount involved is considerable.

Conclusion:
Reversal was not required since Rule 36(4) does not apply to ITC claimed in 2018. ITC can not be claimed since time limits of 16(4) have passed. You can however claim a refund u/s 54(8)(e) if the amount involved is considerable enough. (Reply dt. 07/12/2021)