Eligibility of ITC for GST Return filed in Amnesty Scheme of Late Fees

The P Chhajed & Co LLP has made written submission in respect of availment of Input Tax Credit which represent whether provisions of Section 16(4) can be invoked for any omission / correction of the past period or can be applied for claiming ITC for GST Return filed in Amnesty Scheme of Late Fees.

For example, if February 2020 GSTR 3B is filed in the month of March 2021, so can we claim ITC for that period or Section 16(4) prohibits the same. In one of our client’s case, we got opportunity to represent this matter before the Joint Commissioner in lieu of notice issued by the Superintendent for reversing the ITC of February 2020.

The written submission given below stated as:

In respect of our case, the GSTR 3B for the month of February and March 2020 have been filed after the due date of GSTR 3B of September 2020 and the Ld. Office is of the view that the provisions of Section 16(4) of the Central Goods and Services Tax Act, 2017 (Herein after referred to as the Act) is applicable and thereby Input Tax Credit (Herein after referred to as the ITC) is not allowed.

With respect to the matter, we want to kindly submit that we are eligible for the ITC for the month of February 2020 and March 2020.

The reason for the same is that the provision of Section 16(4) of the Act is applicable only for claiming carry forward credit, making changes in respect to previous financial year in the next financial year for any omission or mistake but it is not applicable for claiming the credit in GSTR 3B of the same financial year for which the credit pertains even though it is filed belatedly.

In support of the same, we humbly submit below details:

We wish to submit that the provisions of Section 16(4) of the Act should not be read in isolation but it should be read with other applicable provisions i.e. Section 16(2), Section 37, 38, 39, 47 etc. The detailed submission of which is as under:

Section 16(2) states that:

Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-

(a)…

(b)…

(c)…

(d) he has furnished the return under section 39

So, one of the prime condition for availing the credit is that the taxpayer should have furnished the return under section 39.

For your ready reference, the relevant applicable provisions of Section 39 are produced here for your ready reference:

Section 39: Furnishing of returns.

(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10, or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed:

Further, as per Section 47 of the Act, if a taxpayer has not filed a return within the time then he is allowed to file the same after payment of late fees and the return will be considered as a valid return.

Section 47: Levy of late fee.

Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or section 38 or returns required under section 39 or section 45 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.

So, a valid return u/s 39 can be furnished with late fees u/s 47 to avail the ITC as per Section 16(2).

As we are of the opinion that provisions of Section 16(4) is applicable only for revision / carry forward of credit / rectification etc., the same has been clearly upheld in following provisions which relates to filing of GST Returns:

Section 39: Furnishing of returns:

(9) Subject to the provisions of sections 37 and section 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars 1[in such form and manner as may be perscribed] old[in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed,] subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following 1[the end of the financial year to which such details pertain] old[the end of the financial year], or the actual date of furnishing of relevant annual return, whichever is earlier.

Section 37: Furnishing details of outward supplies:

(3) Any registered person, who has furnished the details under sub-section (1) for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify such error or omission in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period:

Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier.

Section 38: Furnishing details of inward supplies

(5) Any registered person, who has furnished the details under sub-section (2) for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify such error or omission in the tax period during which such error or omission is noticed in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period:

Provided that no rectification of error or omission in respect of the details furnished under sub-section (2) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier.

So, the reading of the proviso of Section 37(3), 38(3) and 39(9) clearly states that the due date of the month of September following the end of the financial year is related to rectification of error, omission etc.

The provisions of Section 16(4) of the Act should not be read in isolation but should be read with Section 37, 38 and 39. Any related provision in the act read in isolation will defeat its purpose.

Without prejudice to above, it is further submitted that if the provision is to be read as in isolation then Section 16(2) starts with the non-obstacle clause and it would mean to override the other provisions of Section 16.

So, Section 16(2) being non-obstacle clause read with Section 39 will override Section 16(4) and thereby it will be limited to rectification of error and omission only.

Based on above, we request you to kindly approve application of revocation at the earliest without reversal of ITC of February 2020 and March 2020.

Without prejudice to above, it is further submitted that if you feel that this issue will take considerable to decide then you may approve the revocation applicable with simultaneous issuing show cause notice for the subject matter.

It will serve our purpose as well as your purpose.

Without prejudice to above, if still you wish us to reverse the ITC then to have expedite approval of our revocation application, we would like to deposit the same under protest with reserving all the rights of litigation.

Thereby, we request you to kindly approve the same at the earliest as it is affecting our business and we have already been penalized for the same by way of late fees and revocation procedure.

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