APRIL 27, 2020

By S Sivakumar, LL.B., FCA, FCS, ACSI, Advocate

THE provisions contained in Sub-section (4) of Section 16 of CGST Act, 2017, which deals with the time limit for availment of input tax credit, is reproduced below-

16(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.

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.

The question that would naturally arise, is whether, Section 16(4) is applicable to ITC availed under the reverse charge mechanism.

As of now, the liability to pay GST under the Reverse Charge Mechanism ('RCM') is fastened on the recipient of the goods or services, under Section 9(3) of the CGST Act, 2017 which is reproduced below-

The notification issued u/s 9(3) is Notification No. 13/2017-CTR dated 28 th June, 2017 as amended.

Let's further study some of the relevant definitions and statutory provisions…

2(105) "supplier" in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;

2(66) "invoice" or "tax invoice" means the tax invoice referred to in section 31;

2(94) "registered person" means a person who is registered under section 25 but does not include a person having a Unique Identity Number;

2(98) "reverse charge" means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act ;

31(3) Notwithstanding anything contained in sub-sections (1) and (2)-

…………………..

f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;

Rule 36 (1) The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely,-

(a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31;

(b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax;

(c) a debit note issued by a supplier in accordance with the provisions of section 34;

(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports;

(e) an Input Service Distributor invoice or Input Service Distributor credit note or any document issued by an Input Service Distributor in accordance with the provisions of sub-rule (1) of rule 54

A combined study of these provisions would make it clear that, though the liability to pay GST under reverse charge is fastened on the recipient of the goods or services, such a recipient does not become the supplier of such goods or services, though, such recipient would become the person liable to pay tax under Section 9(3).

A further study of Section 31(3)(f) and Rule 36(1)(b) makes it clear that the term 'registered person liable to pay tax under Section 9(3) (i.e under reverse charge) is used in contra distinction to the term 'supplier', consequent to which, the recipient who is required to pay GST under reverse charge and raise the self-invoice under Rule 36(1)(b) cannot be treated as the supplier of such goods or services, despite that such recipient becomes liable to pay GST in respect of such supply of goods or services under Section 9(3).

Hence, in my strong view, the time limit prescribed for availing ITC under Section 16(4) would not apply to the GST paid by the recipient of the goods or services under reverse charge.

Before concluding…

In my view, assessees who have mistakenly left out availment of ITC on import transactions (covered by Bills of Entry) and on other transactions that are covered under RCM, can avail of ITC, on the basis of self-invoices raised under Rule 31(3)(f) for transactions that took place in FY 2017-18 and FY 2018-19. We must bear in mind that, the time limit for availing ITC under Section 16(4) is qua invoices and debit notes, and not qua the supplies.

In cases where assessees want to play it very safe, vis-à-vis certain negative developments like the Rajasthan AAR's decision in Clay Crafts India Pvt Ltd 2020-TIOL-64-AAR-GST, wherein, it was ruled that GST under RCM is payable by the company even in respect of remuneration paid to executive/wholetime directors, the option of now paying the GST liability with interest for FY 2017-18 and FY 2018-19 and availing the ITC thereof on the basis of self-invoices raised under Section 31(3)(f) is always open.

In my further view, any delay in raising of the self-invoices under Section 31(3)(f) or the payment of the GST under RCM (which has to be discharged along with the applicable interest) in respect of transactions covered under reverse charge, would not affect the availment of input tax credit.

[The views expressed are strictly personal.]