[Opinion] Analysis of a Special Procedure for the Rectification of Orders Notified u/s 148 of the CGST Act, 2017

Pounraj Ganesan – [2024] 168 taxmann.com 494 (Article)

(Relief from demand raised due to wrong availment of ITC for FY 2017-18, 2018-19, 2019-20 and 2020-21 in Contravention of Section 16(4))

The Goods and Services Tax (GST) Council, in its 53rd meeting held on June 22, 2024, recommended relaxation in the condition of Section 16(4) of the Central Goods and Services Tax (CGST) Act, 2017 (hereinafter referred to as “the Act”) for the initial years of GST implementation, i.e., financial years 2017-18, 2018-19, 2019-20, and 2020-21.

The Council proposed that the time limit to avail input tax credit (ITC) in respect of any invoice or debit note under Section 16(4) of the Act, through any return in FORM GSTR-3B filed up to November 30, 2021, for the aforementioned financial years, be deemed to be November 30, 2021.

Additionally, it recommended a conditional relaxation of the provisions of Section 16(4) in cases where registered persons, whose registrations had been canceled, filed returns for the period from the effective date of cancellation to the date of revocation of such cancellation, provided these returns were filed within 30 days of the revocation order. To implement these changes, the Council proposed a requisite retrospective amendment to Section 16(4) of the CGST Act, effective from July 1, 2017.

In response to these recommendations, the Central Government has inserted sub-sections (5) and (6) into Section 16 of the Act through Sections 118 and 150 of the Finance (No. 2) Act, 2024.

Sub-section (4), sub-section (5) and sub-section (6) of section 16 of the Act are reproduced below:

“(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 thirtieth day of November 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 madeduring 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.

(5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.

(6) Where registration of a registered person is cancelled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,––

(i) filed upto thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or

(ii) for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is later.”

Further, Section 150 of the Finance (No.2) Act, 2024 (reproduced below), provides that no refund of any tax paid or the input tax credit reversed shall be granted due to retrospective insertion of sub-section (5) and (6) of section 16 of the Act.

“150. No refund shall be made of all the tax paid or the input tax credit reversed, which would not have been so paid, or not reversed, had section 118 been in force at all material times.”

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