Reverse Charge Mechanism, Goods and Services Tax - GST

[vignesh VSACCOUNTOPRIVATELIMITED]

Sir. GTA Expenses accounted in books during the year 2020-21, and RCM was not paid with in the year. Can i pay RCM in November 2021 and Claim ITC?

Posts / Replies

[KASTURI SETHI]

Dear Sh.Vignesh Ji,

(i) What is the date of payment in books of accounts ?

(ii) What is the date of invoice ?

[vignesh VSACCOUNTOPRIVATELIMITED]

sir

(i) date of payment of tax in books of accounts ? -10.11.2021

(ii) date of invoice ? 30.09.2020

(iii) date of payment of invoice amount in books of accounts ? 30.09.2020

[KASTURI SETHI]

This issue has already been discussed in this forum. ITC is time barred being hit by Section 16(4) of CGST Act. GST has to be paid in cash. Interest has also to be paid for delayed payment.

[KASTURI SETHI]

In continuation of my reply above, in this scenario Sections 13, 16(4), 31 of CGST Act and Rule 36 of CGST Rules are, inter alia, integrally related for the purpose of availment of ITC. Delay in raising invoice cannot be regularized on your own by way of payment of interest for delay in payment of tax and penalty for delay in raising invoice for the purpose of ITC. The tax payer/assessee still needs approval/permission from the department. We cannot brush aside that invoice also includes self-invoice and service receiver under RCM is deemed service provider.

The issue is debatable and not litigation free.

These are my personal views. The querist is requested to take care of all the above aspects before arriving at final decision on this issue.

[vignesh VSACCOUNTOPRIVATELIMITED]

thank u Guruji. thanks for ur inputs

[Shilpi Jain]

Self invoice is also an invoice u/s 31. You could explore the possibility of availing credit if the service provider is unregistered.

However as suggested by Kasturi sir this is not free from litigation. At the same time I will not rule out the possibility of eligibility of credit

[KASTURI SETHI]

Yes there is a possibility but remote possibility.

[Amit Agrawal]

I believe that Circular No. 160/16/2021-GST dated 20.09.2021 makes it very clear that for availing ITC on and after 01.01.2021 against 'debit note', "date" of debit note (irrespective of date of invoice) will be relevant factor for determining time-limits to avail ITC u/s 16 (4).

So, even if it is held that "tax-invoice u/s 31 includes self-invoice prescribed under 31 (3) (f)", then the tax-payer can always issue 'debit note' as 'deemed service provider" (which includes supplementary invoice) now, pay pending taxes under RCM (against such debit note) now and then, avail ITC against such debit note.

So, I hold a view that assessee will be entitled to avail ITC in given situation.

(These are strictly personal views of mine and should not be construed as professional advice or suggestion)

[KASTURI SETHI]

Dear Sir,

This strategy will not click. Legally not correct.

[Amit Agrawal]

Sh. Kasturi Sethi Ji,

Request you to kindly elaborate reasoing behind your views please.

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

Dear Sir, With due respect, I differ with your views expressed at serial no.8 dated 23.11.21 on the following grounds :-

(i) As per proviso to Rule 46 of CGST Rules, self invoice has to be issued at the end of a month i.e. within 30 days

Rule 46 Tax invoice

" Provided further that where an invoice is required to be issued under clause (f) of sub-section (3) of section 31, a registered person may issue a consolidated invoice at the end of a month for supplies covered under sub-section (4) of section 9, the aggregate value of such supplies exceeds rupees five thousand in a day from any or all the suppliers :"

(ii) RULE 47. Time limit for issuing tax invoice.

" The invoice referred to in rule 46, in the case of the taxable supply of services, shall be issued within a period of thirty days from the date of the supply of service :"

(iii) As per Section 31 (2) invoice is to be issued within a prescribed period and the period/limit has been prescribed in Rules 46, 47 & 54 of CGST Rules.

(iv) Since service receiver under RCM is a deemed service provider (supplier) (you have also agreed to this), the prescribed limit for issuance of invoice (or self-invoice) is applicable to deemed service provider or de facto service provider. No dispute or doubt about the applicability this time limitation for issuance of all types of invoice.

(v) Time of supply of services has to be adhered to in letter and spirit of Section 13 of CGST Act.

If any registered person does not comply with the above provisions of Rules 46, 47, 36 read with Sections 13 and 31 of CGST Act in the given scenario, he will pay interest and penalty is imposable under Rules 122, 123 & 125 of CGST Rules for late payment of tax as well as irregular availment ITC.. It is pertinent to mention here that payment of interest, penalty & late fee will not regularise the ITC, if taken.

(vi) Section 16 (4) of CGST Act also talks of putting restrictions on taking ITC after the due date of furnishing return under Section 39

" debit note pertains or furnishing of the relevant annual return, whichever is earlier : (Emphasis is supplied on whichever is earlier). Thus the date of debit note (if issued too late) loses its significance for taking credit in view of the due date of annual return.

(vii) The belated date of debit not will not help in view of time limitation prescribed under Section 16 (4) and Rule 80 for furnishing annual return and belated raising invoices in contravention of Rules 46, 47, 54, 36 and Section 31 of CGST Act.

(viii) Last but not the least, the delinking of debit note from invoice w.e.f. 1.1.21 does not provide relaxation for a longer period for availing ITC in view of restrictions for time limitation prescribed in various Sections and rules discussed above.

[Amit Agrawal]

Dear Shri Kasturi Sethi Ji,

Thank you so much for taking time out to elaborate your views. I have nothing but respect for your views (even though same are contrary to my views).

Kindly let me elaborate reasoning/s behind my views:

1. As per Querist, issue related to GTA services received in FY 20-21. And It is presumably understood that annual return for FY 20-21 is not filed and Querist intents to avail ITC immediately on paying outstanding RCM liability.

(Even if such annual return is filed, same does not change my views. This is explained in more details below. But non-filing of annual return for FY 20-21 will avoid one of the aspect/s of controversy involved).

2. Admittedly, the querist has not raised any self invoice showing tax-liability payable under RCM u/s 31 (3) (f) within thirty day's time limit as explained by you. Admittedly, time of supply for these services was in FY 20-21. And I do not have any quarrel for this position of law and my views are not based on challenging / changing time of supply.

2.1 But, it is also true that the querist wants to pay outstanding RCM liability in Nov, 2021. Consequently, it is presumably understood that the querist will prepare self invoice - but this time - by showing tax-liability payable under RCM u/s 31 (f) (3) (i.e. though belatedly in Nov, 2021 against supply received in FY 20-21).

3. Relevant portion of Section 16 (4) (i.e. after 01.01.2021) 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 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"

4. In view of factual & legal position – as listed in various Paras above – is simply in agreement of your views. If I understood correctly, difference in our views originates from our different interpretation of the words 'pertains' and 'relevant' used in above-said Section 16 (4) & their effects / implications.

5. In my humble submission, these words (i.e. pertains / relevant) used in section 16 (4) refers to 'Date' of invoice and not 'the date / period when supply was actually made / received'.

5.1 And I take support for clarification given by CBIC in Para 2 (against Issue No. 1) of Circular No. 160/16/2021-GST dated the 20th September, 2021, which reads as follows:

"The intent of law as specified in the Memorandum explaining the Finance Bill, 2020 states that "Clause 118 of the Bill seeks to amend sub-section (4) of section 16 of the Central Goods and Services Tax Act so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit."

5.2 Thus, even before the amendment under Section 16 (4), the words (i.e. pertains / relevant) used in Section 16 (4), in my respectful submission, refers to 'Date' of invoice and not 'the date / period when supply was actually made / received'. And Parliament (& now, CBIC) has simply explained / clarified this position while amending said section in year 2020.

5.3 This is more so, because one cannot take ITC unless and until invoice/s are issued u/s 31 (3) (f) (Reference: Rule 36 (b) of the CGST Rules, 2017).

6. In addition to above, Board has clarified the effects of amendment brought in section 16 (4) (& made effective from 01.01.2021) vide Para 3 (against Serial No. 1) of above-said Circular No. 160/16/2021-GST (which is issued using powers conferred by section 168(1)) as follows:

"Accordingly, it is clarified that:

a) w.e.f. 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act.

b) The availment of ITC on debit notes in respect of amended provision shall be applicable from 01.01.2021. Accordingly, for availment of ITC on or after 01.01.2021, in respect of debit notes issued either prior to or after 01.01.2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4), whereas any ITC availed prior to 01.01.2021, in respect of debit notes, shall be governed under the provisions of section 16(4), as it existed before the said amendment on 01.01.2021."

6.1 I also wish to draw your attention to to two illustrations given by Board under Para 3 of said circular, which reads as follows:

"Illustration 1. A debit note dated 07.07.2021 is issued in respect of the original invoice dated 16.03.2021. As the invoice pertains to F.Y. 2020- 21, the relevant financial year for availment of ITC in respect of the said invoice in terms of section 16(4) of the CGST shall be 2020-21. However, as the debit note has been issued in FY 2021-22, the relevant financial year for availment of ITC in respect of the said debit note shall be 2021-22 in terms of amended provision of section 16(4) of the CGST Act.

Illustration 2. A debit note has been issued on 10.11.2020 in respect an invoice dated 15.07.2019. As per amended provision of section 16(4), the relevant financial year for availment of input tax credit on the said debit note, on or after 01.01.2021, will be FY 2020-21 and accordingly, the registered person can avail ITC on the same till due date of furnishing of FORM GSTR-3B for the month of September, 2021 or furnishing of the annual return for FY 2020-21, whichever is earlier."

6.2 All of this further supports my views which is listed in Para 5 above. This makes its all more clear that even Board thinks the words (i.e. pertains / relevant), used in Section 16 (4), refers to 'Date' of invoice (& from 01.01.2021, date of 'debit note' wherever applicable) and both these words were never meant (i.e. even prior to amendment, in my view) to refer to the date / period when supply was actually made / received.

7. Now, the querist has not admittedly raised any invoice showing tax-payable under RCM u/s 31 (3) (f) during FY 20-21 against supplies received in FY 20-21. But there-against, in the month of Nov, 21, he will be now raising invoice showing tax-payable under RCM u/s 31 (3) (f) and pay taxes (presumably with applicable interest).

7.1 Now, entire argument to deny ITC in this case lies on the fact that time-limit to issue self invoice was in FY 20-21 in given facts of the case, one cannot change 'time of supply' as defined under law and thereby, time-limit to avail ITC there-against got lapsed after the due date of furnishing of the return under section 39 for the month of September, 2021.

7.2 In my submission, if above argument is taken as reasoning/s to deny ITC, then, 'invoices' to be issued in Nov, 2021 by the querist (i.e. while paying RCM liability for FY 20-21) cannot be called as 'Invoice issued u/s 31 (3) (f)'. This is because time-limit to issue said 'invoice' has already been lapsed in FY 20-21 in itself. And invoices so raised in Nov, 21 is nothing but 'supplementary invoices / debit note' u/s 34 (3)

7.3 In such a case, the querist (as deemed service provider) can very well issue 'Debit Note' under Section 34 (3) which reads as follows:

"Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient 4 one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed."

7.4 Section 34 (4) read as 'Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed'. And as per explanation under Section 34, for the purposes of this Act, the expression “debit note” shall include a supplementary invoice.

7.5 If the Querist could demonstrate that it has indeed raised any self invoice during FY 20-21 but showing NIL tax-liability payable under RCM u/s 31 (3) (f) (i.e. within thirty day's time limit from time of supply during FY 20-21), then, invoices raised by the querist in Nov, 21 will be nothing but 'supplementary invoices / debit note' as envisaged u/s 34 (3) & 34 (4).

7.7 In the context under discussion, one also note Rule 53 (1A) (g) of the CGST Rules, 2017, relevant portion – for subject under discussion – is as follows:

“A credit or debit note referred to in section 34 shall contain the following particulars, namely:-

(g) serial number(s) and date(s) of the corresponding tax invoice(s) or, as the case may be, bill(s) of supply;”

7.8 As time-limit to issue 'proper invoice showing tax liability under RCM' is already lapsed by the querist in FY 20-21, 'proper invoices' raised in Nov, 21 by him showing tax-liability (which was payable in FY 20-21 but not paid then) is nothing but 'Supplementary Invoices' (i.e. Debit Notes u/s 34(3) & 34 (4)) in my view.

8. Summarizing all above, I hold a view that the querist is entitled to avail such ITC after "raising of 'invoice' in Nov, 21 and paying taxes there-against" upto the due date of furnishing of the return under section 39 for the month of September, 2022 or furnishing of the relevant annual return for FY 2021-2022, whichever is earlier.

8.1 As querist is eligible to take such ITC, question of any wrong availment of ITC or imposition of penalty there-against does not arise in my view. However, the querist may be saddened with general penalty as it failed to raise proper self-invoice showing tax payable under RCM u/s 31 (3) (f) during FY 20-21.

Disclaimer: These are strictly personal views of mine and should not be construed as professional advice or suggestion to the querist or anyone else.

[KASTURI SETHI]

Dear Sh.Amit Agrawal Ji,

Such a lengthy reply !!. You are a very laborious as well as voracious reader. No match for your this habit and passion.I am all praise for such nature and aptitude. I have gone through the whole reply word for word. This reminds of two phrases which are as under :-

(i) Dissent is decent.

(ii) Brevity is spice of life.-----William Shakespeare

I have learnt a lot my your reply.

[KASTURI SETHI]

SH.AMIT AGRAWAL JI,

Humble suggestion

If you believe in lengthy replies, I want to inform you that the departmental officers/Adjudicating Authorities have no time to peruse such lengthy/bulky replies. They believe in brevity. Proverb, "Gaagar Mein Sagar". However, the assessees like lengthy replies. I am sharing in the interest of visitors of TMI.

[Amit Agrawal]

Dear Shri Kasturi Sethi Ji,

Thank you for your kind words of appreciation. My efforts are nothing compared to efforts you put at this forum helping so-many visitors for so-long years.

With regards to suggestion, I feels that what is 'brevity' is also matter of everyone's own perception. And what works for one while representing the client before the departmental officers / Adjudicating Authorities may not work for other.

Each one has own style and each style has its own plus and minuses. Ultimately, till the time, one is getting results of getting relief for assessee in fastest & fairest possible way, should feel fine with his own style.

As issue under discussion here is highly contentious, having recurcations accross the industry and every reader visiting this forum may not be a professional and may not be fully conversant with actual contents of referred circulars / provisions / rules, I have taken liberty to re-produce those circulars / provisions / rules explaining context behind my views as well as tried to explain things in minute details.

This is more so becuase such online forum discussion really has its limitations as we are not dealing with each other face to face and really, not sure about reasons behind other's point of view. And I am still learning for this experience of online debate / discussion.

Having said that no-one is perfect (at-least I am not). And you being very senior (not just age-wise, but also having relevant solid experience including from Dept's side for so-long years), I have taken your suggestions very positively. I will try my best to incorporate your suggestions wherever I can.

Ouups ...... another lenghty post (I will improve)

[KASTURI SETHI]

Dear Sir,

I agree with your logic and reasoning. Our ultimate mission is that the assessee must get justice (relief) on merits.

[Ganeshan Kalyani]

One advocate had written nearly 100 page reply to be submitted for a Divorce case. He showed it to client and charged ₹ 15000/- and for additional two copies of same for submission he charged ₹ 30000/- (15000x2). He told client that he mentioned 3 strong section. So his fees is justified. Advocate also asked 500 extra for printing cost.

I wondered at first place with so many cases pending before Court where it will get time to read 100 page reply. How justice will be given. It is well known to advocate himself that Judge won't read such a lengthy reply. But at the same he know if he give 5 page reply then his client won't give the fees he wish to have. It a hence a difficult situation and he then choose to get justice for himself by big reply and handsome fees rather than some page reply and getting justice for his client. It was bad of such advocate. What I expected was a reply to the point and matter should be over.

[Amit Agrawal]

I got following personal message from the Querist, Shri Vignesh Ji:

"Sir , thank u for providing such a logical and thought provoking explanation. It shows ur strength on the Subject. ur Explanation was such beautiful that everyone can understand. Thank u sir once again"

I thank Shri Vignesh Ji to acknowledging my efforts!

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

You deserve kudos.

Taking ITC in the scenario is risk-prone.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Pl. refer to your views at serial no.17 above. I term it as exploitation of gullible client at the hands of an advocate. I intend to share my experience in the interest of the assessees as well as professionals. During my service I was posted as Supdt.(Adjudication) (Commissioner's competency) in the year 2005-06.During that period I observed that some advocates had been used to incorporate full text of case laws in the reply to SCNs with an intent to impress upon the client with a lengthy reply which was unreasonable and unjustified. So the assessees should be aware of such tactics. We should be concerned with quality and not quantity. We should not lose quality at the cost of quantity. Your above reply dated 28.11.21 will open the eyes of the so many readers/assessees who are influenced by lengthy and bulky replies to SCN.

I shall not exaggerate if I say that you have served not only in the interest of the visitors of TMI but also the society and, in turn, our nation by way of sharing your experience in Discursion Forum.

[KASTURI SETHI]

In continuation of my views at serial no.20, I have also seen Advocates, Chartered Accountants, Company Secretaries, Consultants who adhere to brevity and relevance and to the point while filing reply to the SCNs during my service in the department and I have no hesitation to say that I have learnt from them regarding how to be brief without losing quality.

[Ganeshan Kalyani]

Yes Sir. There are good advocates who really work hard to get justice for the client.

[AMBADAS VENKATESWARA]

you can pay rcm but not claim itc