GST update No 143 on amended Section 16, 34 & 37 of the CGST Act, 2017

Several amendments have been proposed in the GST Law in the Finance Bill which is a part of Union Budget announced for 2022-23. Amendments have been made in the provisions regarding filing of returns, availment of input tax credit, GST refunds etc. Some of these amendments are in favour of taxpayers while some are revenue friendly. The present update seeks to discuss the changes made in Section 16, Section 34 and Section 37 of the CGST Act, 2017. Section 16 (2) is amended wherein a new clause (ba) is inserted. The said clause is related to availment of ITC with respect to a supply can be availed only if it is not restricted in the details communicated to the taxpayer under Section 38. According to this provision, the ITC with respect to an invoice is available only if the same is reflected in auto-generated statement such as GSTR-2B and is not ineligible for availment. For example- In case of accommodation services availed by a supplier in hotel situated outside State, the CGST and SGST of another State is being levied, which cannot be availed by the recipient. Consequently, it is provided that mere reflection of input tax credit in GSTR-2B would not suffice but the eligibility of credit is also to be taken care of. Furthermore, Section 16(4) of CGST Act, 2017 is also amended. This is done so that an extended time period can be allowed for availment of input tax credit by a registered person in respect of any invoice pertaining to the Financial Year upto 30th November of the following Financial Year. According to the present provision, the time limit for availing ITC is due date of furnishing return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of relevant annual return, whichever is earlier. The proposed amendment seeks to extend the due date of availment of ITC as 30th November of subsequent year for all the assessees. Through introduction of this amendment, the Government seeks to bring clarity and avoid unwanted litigations as regards the time limit for availment of input tax credit. This is for the reason that the time limit for taking credit is linked to due date of filing return which has been extended numerous times, earlier on account of initial stages of GST implementation and thereafter due to outbreak of pandemic which results in unwarranted disputes. Moreover, the issue was litigated even on the grounds that GSTR-3B is not a return for the purpose of computing time limit which was upheld by hon’ble Gujarat High Court in the case of AAP & Co. VERSUS UNION OF INDIA. However, the Apex Court has recently, reversed the judgment by concluding that GSTR-3B is return under section 39 of the CGST Act, 2017. The time limit is now fixed in absolute terms to bring clarity into the minds of the assessee as regards availment of input tax credit. It is pertinent to mention that further amendment is proposed under section 34(2) of CGST Act, 2017 wherein time limit for issuance of credit note has also been changed on similar lines. Now as per the new time limit, credit note can be issued upto 30th November of following financial year in respect of supplies made. Similarly, Section 37 of CGST Act, 2017 also stands amended to specify the time limit for rectification of errors in respect of details of outward supplies upto 30th November of subsequent financial year. The above changes indicate the initiatives taken by the government towards the motto of “easy and simple tax” as the complexities in the provisions have been simplified by making reference of fixed date of availment of credit, fixed time limit for issuance of credit note and making rectification of errors rather than using relative term of due date of filing the return for the September month following the financial year. This amendment also seeks to leave no room for doubt as regards claiming any benefit by the assessee on technical grounds such as GSTR-3B not to be considered as return under section 39 of the CGST Act, 2017. Although, the issue has been settled by the Apex Court in favour of the department that GSTR-3B is a return under section 39, the government appears to be extra cautious to avoid any unwarranted litigation in future.

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GST update No 143 on amended Section 16, 34 & 37 of the CGST Act, 2017

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