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The AAR, Gujarat in the matter of M/S I-Tech Plast India Pvt. Ltd. [Advance Ruling No. GUJ/GAAR/R/10/2021 decided on January 20, 2021] held that, Input Tax Credit (“ITC”) in relation to Central Goods and Services Tax (“CGST”) and State Goods and Services Tax (“SGST”) charged separately, cannot be claimed on Debit Notes (“DN”) issued by the supplier in current Financial Year (“FY”) i.e. 2020-21, towards the transactions for the period 2018-19. Further held that, even after amendment in Section 16(4) of the Central Goods and Services Tax Act, 2017 (“CGST Act”), the ITC on DN should be seen w.r.t. the FY for which corresponding invoices were issued instead of FY in which DN were issued.
Facts:
M/S I-Tech Plast India Pvt. Ltd. (“the Applicant”) is engaged in manufacturing and supply of toys made of plastic and/or rubber or both wherein essentially plastic is the main component. The supplier of the Applicant seeks to issue DN in respect of transactions entered into during FY 2018-19, which represents price variation, as the supplier had mistakenly charged lower price and on noticing the error, the supplier desires to rectify the same by issue of DN in FY 2020-21, and proposes to issue DN to the Applicant whereby CGST and SGST reflected separately.
The Applicant contended that, linkage between invoice and DN, as envisaged in the Section 16(4) of the CGST Act, has been dropped now by deleting the phraseology “invoice relating to such” DN, vide the Finance Act, 2020 (“the Finance Act”). Thus, the Applicant is eligible to claim ITC of past periods also, where the error occurred in past periods is noticed in subsequent periods.
Issues:
Held:
The AAR, Gujarat in Advance Ruling No. GUJ/GAAR/R/10/2021 decided on January 20, 2021 held as under:
Our Comments:
Section 16(4) of the CGST Act before amendment linked the time limit to claim the ITC on the DN with the FY in which the corresponding Invoice is issued instead of FY in which DN is issued. This was a big loss to the recipient of DN without any revenue loss to the Government as the Supplier is required to pay GST charged on such DN, whenever issued.
Thus, to rectify this anomaly, amendment was specifically made to delink DN from original invoice so that, availability of ITC can be determined independently on the basis of FY in which DN has been issued.
However, the above AAR completely overlooked the intent of the amendment and thus, is erroneous in the eyes of law.
Relevant Provision:
Section 16(4) of the CGST Act:
Before Amendment vide Finance Act:
“16. Eligibility and conditions for taking input tax credit-
(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 due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or Invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier”
After Amendment vide Finance Act:
“16. Eligibility and conditions for taking input tax credit-
(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 due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or Invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier”
Serial No. 228 of the Goods Rate Notification:
Schedule II – 6%
Sr. No. |
Heading |
Description of goods |
228 |
9503 |
Toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof) [other than electronic toys] |
Section 34(3) of the CGST Act:
“34. Credit and Debit Note-
(3) Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed.”
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DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.
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