Time limit for claiming ITC under RCM, Goods and Services Tax - GST

[ROHIT GOEL]

Dear Sir,

One of our clients had paid legal fees to advocates during FY 2019-20 but excluded to deposit RCM on same. On being pointed out during GST Audit, the client has deposited the same with interest however he maintains that he is eligible to claim ITC on the same in GSTR-3B of Mar 2021 i.e. month of deposit.

The basis for same has been stated to be that as per section 31(3)(f), he is liable to self-invoice for RCM supplies from URD persons. Even though the time of supply provisions clearly mandate issue of invoice within 30 days, they do not impose upper limit. As such, in opinion of client he has self-invoiced in March 2021 and as such his claim of ITC is within time as per section 16(4) as same only restricts ITC to Sep of next year from the year in which invoice is issued.

However, in our opinion, same would be contrary to intention of law and ITC would be inadmissible u/s 16(4). What is the view of the experts regarding the same?

Posts / Replies

[Himansu Sekhar]

The provisions speaks about the period to which such invoice pertains. Where is the doubt?

[Himansu Sekhar]

the invoice to be issued under section 31(3)(f), but not for receiving services from unread. persons, but under Sec 9(3)..

[Himansu Sekhar]

unregd. persons

[Himansu Sekhar]

Also there is no time limit for issuance of debit notes under Sec. 34. Still itc availment is restricted under Sec. 16(4) if the same is not for the same period

[ROHIT GOEL]

Dear Himanshu ji,

Thank you for your response.

There is no doubt to our mind as evident from our observations given above which are also similar to your opinion. However, since the client has been raising this issue persuasively so it seemed appropriate to discuss it with fellow colleagues. Further as per my understanding, section 31(3)(f) only desires self invoicing only in case of supplies u/s 9(3) from URD suppliers. Relevant extract is as under:

"(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;"

Is there any basis for claim of ITC by client as of date? Or our view of rejection of ITC claim entirely valid? A discussion on same is welcome.

[Himansu Sekhar]

when it pertains to 19-20, no basis for the claim

[Himansu Sekhar]

Sir

Sec 9(3) has no relationship with unregd purchases. kindly read section 16(4) carefully. Reverse charge can happen under section 9(3) even if the specified suppliers are regd. For example GTA can be registered. but the recipient will pay gst under reverse charge.

[ROHIT GOEL]

Himanshu ji,

I entirely agree. I was only saying that self invoicing is needed only in case of RCM purchases from URD suppliers. But I don't believe it is relevant to this discussion.

I agree with your view.

[Himansu Sekhar]

Just an extension of the discussion albeit not relevant to the topic sir

[ABHISHEK TRIPATHI]

Dear Rohit Goel,

As you rightly pointed out that now the client cannot issue an invoice because it beyond the period of 30 days as envisaged u/r. 47. However, might be debatable. The same raises a very pertinent question, whether issuance of invoice after the period as stated in the Act makes the invoice invalid?

Why do we raise an invoice? We do because (i) evidence supply of goods and services, (ii) determine the time of supply and (iii) Claim ITC. [Broadly three main things]. The time limit for issuance of invoice is 30 days (for services), don’t you think this time limit is solely because to determine the time of supply? Because the government wants to fasten the tax liability on you and all that matter is that there should be an upper limit for fastening the tax liability and to get the revenue to the exchequers. That’s why the time of supply says “the date of issue of invoice by the supplier or the last date on which he is required, under section 31, to issue the invoice with respect to the supply”. So, what I want to convey is the time prescribes for issuance of invoice is only for fastening the tax liability on the registered person. The government is making sure that whether you raise an invoice or not, you better pay after 30 days.

So, what's the loss of raising an invoice after 30 days? The registered person has to pay tax and interest. That’s the loss of the registered person. Though he shouldn’t be deprived of his ITC. [Imagine a bonafide case].

If the registered person has failed to issue an invoice still his/her liability is set by default after 30 days, in such a situation if he/she issues an invoice after that and pay the tax along with the interest from the day of the liability then your client might have a point. Because for ITC you should strictly interpret the provisions. And 16(4) gives your client the room to do so.

Excellent query though.

Just a thought.

[KASTURI SETHI]

Dear Sir,

My views are as under :-

The words,'invoice relating to such' were delinked (omitted) from 'debit note' (mentioned in Section 16 of CGST Act) vide Notification No.92/20-CT dated 22.12.20 (effective from 1.1.2021) by Section 120 of the Finance Act, 2020 (12 of 2020). This amendment helps the tax payer to take ITC even after filing of return for September of the subsequent year.

Further it is not in dispute that Recipient of service under RCM is deemed service provider (supplier).

The word, 'tax invoice' mentioned in Section 16 (2) of CGST Act also includes self invoice. It is implied.

In this scenario, time of supply prescribed under Section 13(3) of CGST Act helps the assessee.

In my view, ITC is allowed in this scenario. However, the amendment delinking invoice from debit note is effective from 1.1.21 and period in question pertains to the year 2019-20. Hence issue is not litigation-free. I remember very well, during my service in the department, the department has been issuing SCN notice to the assessees wherein amendment was prospective and period involved was retrospective.

So take the decision in view of all aspects.

[ABHISHEK TRIPATHI]

Thank you KS Sir, its Sec. 13(3), 60 days from the date of issue of an invoice. So, Sec. 13(3) should be in addition to 30 days, wherever i have just referred 30 days. Correction to this extent to my view at reply 10.

[KASTURI SETHI]

SH.ABHISHEK TRIPATHI Ji,

Sir, My views echo your views. I have added only the departmental angle.

[GB Rao]

Dear sirs,

I feel that when Tax invoice under Section 16(2) includes self invoice also, then the ITC restriction under Section 16(4) also applies on the same. However, the issue is prone to litigation as rightly opined by our experts.

[KASTURI SETHI]

Sir, W.e.f. 1.1.21 debit note (it being delinked from invoice) as mentioned above, is independent prescribed document for availing ITC. Debit note also INCLUDES supplementary invoice. Any debit note will relate to outward supply and supply will be by way of tax invoiceo bill of supply. Supply may pertain to tax invoice or bill of supply issued more than one or two or three years ago.So self-invoice is not hit by Section 16(4) because of debit note document, a rescuer.

[Himansu Sekhar]

This is the revised Section 16(4)

(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.

[Himansu Sekhar]

More deliberations required

[KASTURI SETHI]

Yes, sir. More deliberations are required. Your latest reply is thought provoking.

[ABHISHEK TRIPATHI]

HS Sir,

Lets say your invoice for FY 2017-18 is issued in 2020-21, in this situation 39 return and 44 return is w.r.t. 2020-21.

[KASTURI SETHI]

Sh.Abhishek Tripathi, Sir. From your reply and hypothetical situation given to Sh.H.S.Sir, it appears to me that you are tilted towards allowing ITC. Am I right ?

[ABHISHEK TRIPATHI]

Dear KS Sir,

Indeed, ITC should be allowed. I am also fully aware that issuance of late invoice/debit note and claiming ITC on them will be next E-way Bill for department. After audits will see lot of bonafide error of issuing debit note later and claiming ITC on them etc. etc.

This will further lead to duty paying under protest at pre-SCN stage and claiming ITC on them. [As under protest isn't a thing in this GST regime, though concept should be borrowed from CE].

Claiming such ITC will be extremely contentious. Huge impact on the industry though hardly discussed.

[KASTURI SETHI]

Sh.Abhishek Tripathi Sir, Delay in issuance of invoice is a separate issue. It cannot be intermingled with eligibility criteria for availing ITC. Here invoice and challan both are mandatory. Under RCM invoice is incomplete without challan and vice versa. If ITC is availed in this scenario, SCN is most likely to be issued. Chances of winning the case by the tax payers are very very bright. The party must be prepared to face litigation. Regarding the provision of 'under protest' as per FAQ, there is no provision in GST regime. I am of the view that saving Section 174 covers the rule of under protest. If we unfold the layers of Central Excise Rules, 1944, CE Rules 2002,b Central Excise Act and Service Tax Rules (some Central Excise Sections were made applicable to Service Tax laws) and read with language of earlier Saving Sections with Saving Section 174 of CGST Act, you will find that the same language has been carried forward in CGST Act. Hence it (under protest) is covered.

[Ganesh S]

Dear Sir,

Please also look at C.B.I. & C. Press Release Nos. 105 & 106/2019, dated 3-7-2019 para "g" in the context of Annual return where credit of RCM of 17-18 paid and availed in 18-19 is discussed.

[Ganeshan Kalyani]

Sir, in my view there is no time limit to raise self invoice. So if the self invoice is raised in Mar 21 then till the month of Sept 21 the ITC can be claimed. Sec 31(2) is applicable only to the supplier of service. Sub-section (3)(f) of sect 31 only prescribes the person responsible for raising self invoice but not the time limit.

Sec.16(4) provides for time limit for claiming ITC based on any invoice and debit note. Any invoice includes self invoice. So if self invoice is dated Mar 21 then ITC can be claimed till Sept 21 as stated above.

[KASTURI SETHI]

I am thankful to Sh.Ganeshan Kalyani Ji for throwing more light on the complicated issue.