Circular No.: 211/5/2024-GST
Date: 26th June, 2024
Subject: Clarification on time limit under Section 16(4) of CGST Act, 2017 in respect of RCM supplies received from unregistered persons
Key Points and Clarifications:
Background:
This circular addresses the applicability of the time limit specified under Section 16(4) of the Central Goods & Services Tax (CGST) Act, 2017 for the availment of input tax credit (ITC) by recipients on tax paid under the reverse charge mechanism (RCM) for supplies received from unregistered persons. It aims to ensure uniformity in the implementation of these provisions across all field formations.
Key Provisions Involved:
- Section 16(4) of the CGST Act, 2017: Specifies the time limit for availing ITC.
- Section 31(3)(f) of the CGST Act, 2017: Requires registered persons to issue an invoice in respect of supplies received from unregistered persons where tax is payable on an RCM basis.
- Section 168(1) of the CGST Act, 2017: Empowers the Board to issue instructions and directions to GST officers to ensure uniformity in the implementation of the Act.
Section 16(4) Details:
- Pre-Amendment: ITC could be availed up to the due date for furnishing the return for the month of September following the end of the financial year to which the invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
- Post-Amendment: ITC can be availed up to the 30th day of November following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Issues and Clarifications:
Issue 1: Applicability of Time Limit for ITC on Tax Paid under RCM
- Concern: There was ambiguity regarding the relevant financial year for determining the time limit under Section 16(4) for availing ITC when the recipient issues an invoice under RCM in respect of supplies from unregistered persons.
- Clarification: The relevant financial year for the time limit to avail ITC under Section 16(4) is the financial year in which the invoice is issued by the recipient under Section 31(3)(f) of the CGST Act. This ensures that recipients have clarity on the time frame within which they can claim ITC for such transactions.
Key Points from Circular:
- Requirement of Invoice:
- As per Section 31(3)(f) of the CGST Act, a registered person liable to pay tax under RCM for supplies received from an unregistered person must issue an invoice on the date of receipt of goods or services.
- This invoice is a prerequisite for availing ITC.
- Relevant Financial Year:
- The financial year to which the invoice pertains is crucial for determining the time limit under Section 16(4).
- In the context of RCM supplies from unregistered persons, the relevant financial year is the year in which the recipient issues the invoice, not the year in which the supply is received.
- Time Limit for Availing ITC:
- ITC can be availed until the 30th day of November following the end of the financial year in which the invoice is issued, or the date of furnishing the relevant annual return, whichever is earlier.
- Interest and Penalties:
- If the recipient issues the invoice after the supply date and pays tax accordingly, they are required to pay interest on the delayed payment of tax.
- Delayed issuance of invoices may also attract penal action under Section 122 of the CGST Act.
- Uniformity in Implementation:
- The circular ensures that these provisions are applied uniformly across all field formations, preventing discrepancies and disputes regarding the applicability of the time limit for availing ITC on RCM supplies from unregistered persons.
Tabular Summary
| Issue | Clarification |
|---|---|
| Applicability of time limit under Section 16(4) for ITC on tax paid under RCM in respect of supplies received from unregistered persons | Relevant financial year for ITC time limit is the year of issuance of invoice by the recipient. Recipient to pay interest on delayed tax payment. |