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Genuine hurdle in compliance of Section 16(4) of CGST Act, 2017
Date 06 Apr 2023
Replies1 Replies
Written By
Taxpayers Face Challenges Claiming Input Tax Credit Due to Delays in GST Registration Reinstatement; Legal Interpretations Offer Hope
Section 16(4) of the CGST Act, 2017, imposes a time limit for availing input tax credit, which can be problematic if a taxpayer's GST registration is canceled and not reinstated promptly. In such cases, taxpayers may need to appeal, which is time-consuming and might prevent them from claiming input tax credit within the prescribed timeframe. Although the government has introduced an amnesty scheme for revoking canceled registrations, it does not address the issue of claiming input tax credit in delayed returns. Legal interpretations suggest that input tax credit may still be claimed if invoices are recorded before the deadline, despite filing delays.

As we all know, the Government do every effort to deny the benefit f input tax credit to the taxpayers. One of the efforts is made under Section 16(4) of CGST Act, 2017, in which the time limit is prescribed for availment of input tax credit.

As per Section 16(4), the input tax credit shall not be entitled in respect of invoice or debit note after thirtieth 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.

The condition given in the section 16(4) can be easily complied in the normal course of business, however the problem may arise where the GST registration is cancelled by the authority.

Imagine a situation where the GST registration is cancelled, and revocation application could not be filed within time due to any unavoidable reasons. In that case the taxpayer has no option but to file the appeal before relevant authorities. Further, if the relevant authority donot give favorable decision in that case the taxpayer may have to also approach the Hon’ble High Court.

And, we cannot deny the fact that the appeal to appellate authority or writ petition to Hon’ble High Court is a time taking process. And due to which there may be possibility that the taxpayer couldnot claim input tax credit in GST return within the time prescribed in section 16(4). In otherwords, delayed GST returns may be filed after revocation of GST registration and input tax credit is availed in such delayed GST returns.

In the given situation, where delayed GST return is filed it is difficult to comply with the timelimit mentioned in Section 16(4) for availment of input tax credit.

Further, recently the Government has provided one time amnesty scheme for revocation of GST registrations. However, the Government has not give any relief to avail the input tax credit in delayed returns in case of cancelled registrations.

It would be a welcome step by the Government if relaxation is provided to avail the input tax credit in the delayed returns in the case of cancelled registration. That will avoid huge litigation which is going to arise on this single issue.  

CA (Adv.) Sandeep Saini

Partner-Scarce Legal India LLP

Goods and Services Tax - GST
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Replied on Jan 31, 2024

its very surprising..

plain reading of section 16(4) suggests that restriction to avail itc is on those invoices or debit notes which are issued after the due date of filing return under section 39 for the month of september of next financial year.

section 16(4) nowhere says that itc will be denied if gstr3/3b is filed after the date mentioned in section 16(4).

even if you go through gst faq issued by cbic, it clearly mentions that

"the underlying reasoning for this restriction is that no change in return is permitted after september of next fy. if annual return is filed before the month of september, then no change can be made after filing of annual return."

in gobinda construction v. union of india - 2023 (9) tmi 902 - patna high court, in patna high court, the appellant raised the issue of constitutional validity of section 16(4) of the cgst act.

in my view, the appellant should have raised the issue "whether section 16(4) is restricting the itc for invoices/debit notes issued after "the date" or if gstr-3b filed after "the date" mentioned in section 16(4).

in my opinion assessee can calim itc even after the date mentioned in section 16(4), if invoices are appearing in its gstr-2a/2b before "the date" and its has filed gstr-3b after "the date".

section 16(4) talks about date of invoices/debit notes issued "the date" which pertain to previous financial year, i.e. supply or service or both were made/rendered in previous financial year.

the hon’ble supreme court of india may shorty throw light on this contentious issue, in the case of mrityunjay kumar v. union of india [2024 (1) tmi 288 - sc order],

the matter has been listed for further hearing on february 05, 2024.

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