Eligibility of ITC AGAINST LATE PAYMENT OF OUR VENDOR, Goods and Services Tax - GST

[SURYAKANT MITHBAVKAR]

We have manufacturing unit registered under GST. One of our vendor has paid his GST Liability for 2020-21 in Mar-23. He is filed GSTR-1 and same has been reflected in our GSTR-2A.

In our books we have availed ITC against the above vendor in same year i.e. 20-21 instead of not reflected in 2A.

whether this ITC is allowed in our assessment or not. If yes any notification ?

Posts / Replies

[Padmanathan Kollengode]

Note: It is assumed that you have availed ITC in GSTR-3B in 20-21. The availability of ITC is subject to litigation.

On the outset, there are recent Supreme Court decisions which has held that ITC is not a vested right but only concession granted by the statutes and as such, the statute can prescribe conditions for granting the concession.

Section 16(2)(c) states that the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply.

Admittedly, in your case, the tax was paid by the supplier only in March 2023. Therefore, at the time of availing ITC in 2020-21, you were not eligible for the same.

Further, as per Sec. 16(4) the time limit to avail ITC for a FY is up to due date of return for the month of September of subsequent FY. (In your case 20th Oct 2021) and the supplier has not paid taxes within the said period.

Therefore, the department can take a stand that the credit which you have availed in 20-21 is ineligible u/s 16(2)(c) and by the time credit became eligible in March 2023, the time limit under 16(4) has elapsed. Therefore you are not entitled to take the ITC.

[Amit Agrawal]

During FY 2020-21, bar in availing ITC u/s rule 36 (4) (i.e. despite same being not reflected in your From GSTR-2A) was not absolute. You were allowed to avail such ITC (despite being not reflected in your From GSTR-2A) subject to different outer limit/s specified u/r 36 (4) for different period.

Kindly refer to Notification No. 49/2019 – Central Tax dated 09-10-2019, Notification No. 75/2019 – Central Tax dated 26-12-2019, NOTIFICATION No. 30/2020–Central Tax dated 03-04-2020, NOTIFICATION NO. 94/2020-Central Tax dated 22-12-2020.

Delay in payment of taxes by the supplier - in given case - cannot be reason to deny you ITC using Section 16 (2) (c) of the CGST Act, 2017.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

And Section 16 (4) cannot be used to deny subject ITC as you have availed the same within the time-limit permitted therein.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

When the Govt has received the revenue, it should ideally not deny credit.

Also agree with Amitji that the provision in the Statute was inserted only from 1-1-2022 i.e. in Section 16(2) and thereby this can also be another ground.

[Padmanathan Kollengode]

Ld. friends Amit Ji and Shilpi Ma'am,

I believe the issue here is not with regard to Rule 36 or 16(2)(aa) as the querist has pointed out that said transaction has appeared in GSTR-2A.

The moot question here is whether ITC shall be available to the recipient when the supplier has not made the payment of tax in time. I break it down in two aspects:-

1. When the invoice is issued and ITC is taken in 2020-21, the recipient is not eligible for the same as Sec 16(2)(c) has not been satisfied. Therefore, can the ITC taken in 2020-21 be said to be eligible?

2. When the supplier pays the tax in March 2023 and the ITC becomes eligible as per 16(2), time limit for taking ITC u/s 16(4) has expired.

The question seems to be that whether ITC which was ineligible but availed within time limit become eligible on subsequent payment after time limit?