Tax liability/ ITC of RCM transaction for FY 2021-22, Goods and Services Tax - GST

[AKSHAT AGARWAL]

In one of case, client have not paid RCM on certain expenses for FY 2021-22. Case is under audit for FY 2021-22. Above transaction involves tax of Rs. 4.5 Lac. Now the ITC of such RCM can be taken by paying the same through April-25 GSTR-3B keeping in view the amended provision of Sec-47A of CGST Rule, 2017.

Thanks

Posts / Replies

[YAGAY andSUN]

Here's a detailed breakdown and our Inputs on your query: -

Background:

• The client did not pay Reverse Charge Mechanism (RCM) GST on certain expenses during FY 2021-22.

• The case is under audit for FY 2021-22.

• The tax amount involved is ₹4.5 lakh.

• The client is now willing to discharge RCM liability and claim ITC in the GSTR-3B of April 2025.

• You mentioned Section 47A of CGST Act, 2017 — likely referring to the amended time limit for availing ITC.

Legal Basis – ITC on RCM under GST:

Under GST law:

• RCM tax must be paid in cash (not through ITC).

• Once paid, ITC can be claimed, subject to the time limits laid down in Section 16(4) of the CGST Act, 2017.

Key Amendment – Section 16(4):

• Before amendment: ITC on any invoice or debit note had to be claimed by the due date of GSTR-3B for September following the end of the financial year, or before filing the annual return, whichever was earlier.

• After amendment via Finance Act 2022 (effective 01-Oct-2022): The time limit was extended to 30th November of the next financial year.

• Finance Act 2023 added Section 47A – but this relates to automatic compounding of late fees, not ITC. You likely meant Section 16(4) instead.

Current Position (as per latest provisions):

For FY 2021-22, the last date to avail ITC would have been:

• 30th November 2022 (as per amended Section 16(4)).

So, availing ITC in April 2025 is not permissible for FY 2021-22 RCM liability because the time limit has already lapsed.

Conclusion:

• Your client can and should pay the RCM liability now (₹4.5 lakh) to rectify non-compliance and avoid further interest/penalty.

• However, ITC cannot be claimed in April 2025, as the time limit to claim ITC for FY 2021-22 expired on 30-Nov-2022.

• This tax amount will therefore become a cost to the business.

[AKSHAT AGARWAL]

Sir, I have wrongly mentioned Sec-47A, I am discussing in light of provision of Rule-47A

[Sadanand Bulbule]

I endorse the ponit-wise explanation offered by Yagay Sir