1. Chapter VIII of the Act stipulates statutory provisions for maintenance of Accounts & Records. As per Section 35(1)(d) read with Rule 56(4) & (5), Input Tax Credit Ledger has to be maintained electronically based on tax invoices issued by the vendors. In this account, input tax credit has to be claimed together with a register of tax invoices. It is mandated to mention name of the supplier, invoice number & date. Accordingly, every taxpayer maintains Books of Account for inward supplies where the Input Tax Credit has been taken for all incoming goods and services. In this account, as and when the goods/services are received, the same are accounted by raising a Goods Receipt Note or Service Accounting Reference, as the case may be, and corresponding input tax credit is taken against the said receipt. Section 16(4) time limit is applicable only to this accounting ledger and not for the intimation of total tax credit to the electronic credit ledger that happens at the time of filing monthly return u/s 39.
2. The invoked Section 16(4) reads as follows
"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 u/s 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….."
Nowhere in the above sub-section, there is any mention of the necessity of taking input tax credit in electronic credit ledger.
Further in the above sub-section it has been referred as "input tax credit in respect of any invoice or debit note…". This invoice/debit note wise credit is possible only in the register maintained u/s 35(1) and not in the consolidated input tax credit manually entered in to the electronic credit ledger at the time of filing monthly return GSTR-3B u/s 39(1).
3. There are two activities (i) taking credit and (ii) intimating the credit - the first activity "taking credit" happens in Section 35(1) Ledger and the second activity "intimation" happens at the time of filing return u/s39. This is nothing but reflection of the input tax credit already taken so as to utilize the credit for payment of tax.
4. It is very important to understand the history of auto populated system planned in GSTN electronic portal for ensuring seamless flow of input tax credit so as to avoid cascading effect. This seamless flow and avoidance of cascading effect are the prime objectives of the Lawmakers at the time of transition to GST. Originally it was planned as an automated system of input tax credit in the electronic credit ledger maintained in the GSTN portal as per the following steps.
a) Section 37 - filing outward supply detail - GSTR-1 - by 10th of every month;
b) Section 38 - filing inward supply detail - GSTR-2 by 15th of every month;
c) Section 39 - filing monthly Return-GSTR-3 - by 20th of every month - combination of outward supply details, inward supply detail and tax payable/paid;
6. As per Rule 61 read with Rule 60, ITC flow into electronic credit ledger was planned in an automated manner. That is when a supplier files his outward supply details GSTR-1 under Section 37 - said detail will get auto populated in to GSTR- 2A and visible to the recipient. In this the recipient has to modify, accept or reject the receipt based on ITC Ledger maintained u/s 35 (1). After this reconciliation by the recipient, GSTR-2 will be filed u/s 38 with invoice wise input tax credit availed. Based on GSTR-2 total amount of ITC will flow into Electronic Credit Ledger at the time of filing Monthly Return GSTR-3.
7. Due to technical glitches and IT infrastructure problems, the automated system of invoice wise input tax credit in GSTR-2 based on GSTR-1 filed by the vendors has not been implemented. As a result, auto flow of total input tax credit from GSTR-2 to GSTR-3 also has not been implemented. Both are kept in abeyance temporarily. However, in place of GSTR-3 a new Return form GSTR-3B has been introduced u/r 61(5). This GSTR-3B is only a summary return where in total input tax credit as appearing in ITC Ledger maintained u/s 35 (1) is entered manually into the electronic credit ledger. In the absence of GSTR-2 and auto populated credit into electronic credit ledger at the time of filing GSTR-3B Return, the time limit u/s 16(4) can be applied only for the ITC Ledger maintained u/s 35(1).
8. According to Section 2(46) "electronic credit ledger" means the electronic credit ledger referred to in sub-section (2) of Section 49. Sub-section (2) of Section (49) reads as "the input tax credit as self-assessed in the return of a registered person shall be credited to his electronic ledger, in accordance with Section 41 & 43A, to be maintained in such manner as may be prescribed". Section 41 directs to take self-assessed input tax credit provisionally as per the procedure prescribed. Procedure is still not prescribed. Due to failure of automated system as prescribed u/s 38 read with Rule 60, a new procedure vide Section 43A has been proposed in the GST Amendment Act, 2018 which is yet to be notified.
9. Hon'ble Delhi High Court in the case of Bharti Airtel Ltd. vs. Union of India and others - 2020-TIOL-901-HC-DEL-GST has allowed rectification of input tax credit reporting error that happened in GSTR-3B Return. This rectification has been allowed beyond the time period prescribed under proviso to Section 39(9) of the Act on the point that the Central Government has failed to operationalize the originally planned scheme of auto populated returns of GSTR-2A, GSTR-2 & GSTR-3 and for this failure the Petitioner cannot be denied the benefit.
10. Recently in the case of Sun Dye Chem vs. The Assistant Commissioner (ST), Tirupur - 2020-TIOL-1858-HC-MAD, the Hon'ble Madras High Court has decided that "the auto populated system through GSTR-1A & GSTR-2A is still not yet notified due to which the statutory procedure contemplated for seamless credit is unavailable and so the Petitioner is permitted to rectify the error committed in GSTR-1 beyond the time period specified u/n no.73/2018-C.T.". The constraint discussed in the above two judgments is equally applicable to the time limit under Section 16(4) as well.
11. Section 16(2) starts with a non-obstante clause & thereby overrides all other sub-sections of Section 16. Here, out of four conditions, the last condition is filing of Return u/s 39 and there is no condition of timely filing. As long as the taxpayer is in possession of tax invoice/debit note/other documents prescribed u/r 36 for the goods/services that has been received, he is entitled to take the credit. Trial test started through GSTR-2A display from the year 2018 is only used for manual reconciliation of the same with ITC Ledger maintained u/s 35(1). Still this is not in editable form for auto flow of input tax credit to electronic credit ledger.
12. Delay or default in filing GSTR-3B Return warrants late fee & interest. If late fee for the default u/s 47 and interest for the delay in payment of tax u/s 50 have been paid it is said to be regularized. Once the delay has been regularized such returns have to be construed as filed within the due date.
13. Nowhere in the GST Law, it has been prescribed that input tax credit entitlement can come only through GSTR-3B. Also making full payment of tax at the time of filing Monthly Return is not a pre-condition. But GSTN portal does not allow taxpayers to file Monthly Return without payment of full tax. If the system allows part payment the taxpayer would have reflected the ITC in the electronic ledger, paid the tax from the available amount of electronic cash and credit account. Portal has prevented the tax payers to file self-assessed GSTR-3B Return provisionally as contemplated u/s 41. GST Council in its 31st Meeting vide Agenda No.7 (xx) accepted this lacuna while recommending law amendment in respect of interest chargeable u/s 50 as below:
"Law accepts furnishing of a return without payment of full tax as self-assessed as per the said return but the said return would be regarded as an invalid return. No such facility has been yet made available on the common portal and this inflexibility increases the interest burden".
AFTER the hue and cry on payment of interest u/s 50 of the CGST 
