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Time to act - Extension of GST input tax credit of FY 2017-18

Sivaraman.A.R 
on 14 February 2019

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Introduction

This article deals with an analysis of extension of time limit for availing Input tax credit (ITC) in respect of inward supply of goods or services or both relating to financial year 2017-18 vide Central Goods and Service Tax (Second Removal of Difficulties) Order, 2018 (hereinafter referred to as 'Order') dated 31.12.2018

Basic time limit for taking ITC

Time limit under section 16(4) - Due date for furnishing of the return under section 39 for the month of September following the end of FY or furnishing of relevant annual return, whichever is earlier. (i.e. September 2018 GSTR 3B which is already over on October 25.2018)

Extension of time limit for taking ITC

In order to remove the difficulties faced by the taxpayers during first year of implementation of GST, in exercise of power under section 172 of the Act, the Central Government passed Central Goods and Service Tax (Second Removal of Difficulties) Order, 2018 on 31.12.2018 and through that Order; a proviso is inserted to section 16(4) of the Act.

As per the proviso, the due date for taking ITC for FY 2017-18 is extended till due date of furnishing the return for the month of March 2019, subject to condition.

Analysis

On reading the proviso to section 16(4) of the Act, inserted by Order, we can understand that ITC of financial year 2017-18 missed to be availed by registered person up to the due of filing of return of September 2018, can be still availed in the return of October 2018 to March 2019, if and only if, the details of invoices are uploaded by the supplier under section 37(1) of the Act. i.e. GSTR 1. If invoices are not in GSTR 2A, no ITC can be taken on those invoices.

Hence it is very important on the part of recipient who missed to take credit to ensure that the bills are duly filed by the supplier in their GSTR 1 and it gets populated in GSTR 2A on or before due date for filing of return for the month of March 2019.

In case of inward supplies from registered dealers on which the recipient has to pay tax on reverse charge mechanism basis (RCM) under section 9(3), the dealer has to not only ensure that his bills gets populated in GSTR 2A, but also pay tax on reverse charge basis along with interest (as applicable), before availing credit.

In case of inward supplies from unregistered dealer on which the recipient has to pay tax on reverse charge basis under section 9(3) [not section 9(4) which is suspended and redrafted], the dealer has to pay tax on reverse charge basis with interest (as applicable), but loses the opportunity to avail credit as no invoice will get populated in GSTR 2A.

Action points for those inward suppliers who missed to take Input tax credit are explained under the following different scenarios

Conclusion

In the case of eligible ITCs  on FCM Basis, the dealers, who missed to take credit and their books of accounts are closed by audit and by filing of return of Income under Income Tax Act, 1961, would now be in a new difficult decision making position as to how to take credit due to removal of difficulties in GST. With removal of difficulties in GST, the missed ITCs are no more sunk cost but floating cost and based on materiality, the dealers have to take a call on how to avail these missing ITCs and decide whether to take it out or to dip it back. For those assesses who have not concluded audit and not yet filed Income tax return, the doors of books of accounts are still open for them to accommodate these ITCs.

In the case of all dealers who had not paid GST on RCM basis and have not taken RCM credit during financial year 2017-18 on supplies from registered dealer, this Order is an opportunity for them to comply with the Act, if appropriate timely step is taken. Discussion on validity of making purchasers entitlement to take credit only on suppliers act and the GST form for section 39 of the Act is not touched upon in this article. The content of this article is only a knowledge sharing initiative for discussion purpose and not professional advice and author assumes no responsibility for use of this information.

The author can also be reached at sivaraman004@gmail.com


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