211/05/2024-GST — Clarification on time limit under Section 16(4) of CGST Act, 2017 in respect of RCM supplies received from unregistered persons.
Summary
This new GST circular from the CBIC clarifies the deadline for claiming Input Tax Credit (ITC) on GST paid under Reverse Charge Mechanism (RCM) on supplies received from unregistered persons (URPs). It addresses a confusion that arose because the government had temporarily suspended the RCM provisions for URP supplies, and then reinstated them.
Essentially, the circular states that the time limit for claiming ITC under Section 16(4) of the CGST Act applies to RCM paid on URP supplies. This means you can claim ITC for invoices related to these RCM payments, but you need to do it within a specific timeframe. This time limit is tied to the due date for filing the return for the month of September following the end of the financial year in which the invoice was issued, or the date of filing the relevant annual return, whichever is earlier.
This circular impacts businesses registered under GST who are liable to pay tax under RCM on goods or services received from unregistered suppliers. These businesses must ensure they claim their ITC within the stipulated deadline. For example, for an invoice dated in August 2023, the ITC must be claimed in GSTR-3B by the due date of filing the September 2024 return, or the date of filing the annual return for FY 2023-24, whichever is earlier. Failure to comply with this deadline will result in the loss of the ITC. The CBIC issued this clarification to bring clarity and ensure consistent practices across the country, avoiding potential disputes.
Key Changes
| Change | Impact |
|---|---|
| The time limit under Section 16(4) of the CGST Act, 2017 does NOT apply to claiming Input Tax Credit (ITC) on Reverse Charge Mechanism (RCM) supplies received from unregistered persons (URP) during the period from 01.07.2017 to 31.01.2019. | Businesses can now claim ITC on RCM supplies from URPS for this period, even if the original deadline under Section 16(4) has passed, provided they meet all other eligibility conditions for ITC. |
| The circular clarifies the applicability of Notification No. 08/2018-Central Tax dated 23.01.2018, which exempted registered persons from paying GST under RCM on supplies received from unregistered persons, to ITC claim timelines. | Removes ambiguity regarding the interplay between the RCM exemption and the ITC claim limitations under Section 16(4) for the specified period, offering clarity to businesses. |
| The circular provides a retrospective clarification on the ITC eligibility, addressing potential disputes and litigations regarding the time limit for claiming ITC on RCM from URPS for the initial period of GST implementation. | Reduces the burden of proof on businesses seeking to claim such ITC and potentially resolves pending assessments and appeals. |
| The circular emphasizes that all other conditions for claiming ITC, as prescribed under the CGST Act and Rules, must be met to be eligible for ITC on RCM supplies from URPS. | Businesses need to ensure they fulfill all other ITC eligibility criteria, such as possession of valid tax invoices, proof of payment, and proper recording of the transaction, to avail the benefit of this clarification. |