The Calcutta High Court in its order in the case of Rainbow Infrastructure Private Limited & Anr. [W.P.A. 7159 of 2020] has issued notice to the Centre and State Government on the plea challenging the constitutional validity and vires of Section 16(4) of the CGST Act, 2017 and of West Bengal Goods and Service Tax Act, 2017. Section 16(4) prescribes the time limit for availing of input tax credit.
As reported the petition further challenged the constitutional validity of the retrospective amendment of Rule 61 of the CGST Rules, 2017 or WBGST Rules, 2017. It may be noted here that Rule 61(5) was substituted by the CGST (Sixth Amendment) Rues,2019 w.e.f. 1-7-2017 whereby GSTR-3B was legally recognized as GST return in place of GSTR-3.
The petition also prayed for declaration of return required to be furnished in Form GSTR- 3B as an incomplete, non-est, and invalid return in the eye of law.
The arguments were made on the ground that if the restriction under Section 16(4) of the Act is invoked and ITC is denied then the ‘non-obstante clause’ in Section 16(2) of the Act would cease to have any meaning or purpose and would be rendered otiose.
It was also argued that ITC is not taken through return but instead it is taken through the books of accounts immediately on receipt of goods or services in terms of 1st proviso to Section 16(2) of the Act.
Further arguments were laid that the provision of section 16(4) of the CGST Act,2017/WBGST Act, 2017 is arbitrary and unreasonable as they are violative of Article
It was also pleaded that provisions of Section 16(4) laying down time limit for availing of ITC are violative of Article 19(1)(g) and Article 300A of the Constitution. The denial of ITC would defeat the object of the 122 nd Constitutional Amendment Bill, 2017, that is to avoid the cascading effect of taxes.
Statutory provisions:
Time limit for availing of ITC is prescribed under Section 16(4)
Section 16(4) of the CGST Act, 2017 mandates the time limit for availing of Input Tax Credit and the provision is 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 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.
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 made during 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.
Conditions for availing ITC under Section 16(2)
(2) 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) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
(b) he has received the goods or services or both.
Explanation.— For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services––
(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;
(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person;
(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit of input tax on
payment made by him of the amount towards the value of supply of goods or services or
both along with tax payable thereon.
Filing of GSTR-3B (Rule 61(5))
(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 or in FORM GSTR-2 under section 38 has been extended, the return specified in subsection (1) of section 39 shall, in such manner and subject to such conditions as the Commissioner may, by notification, specify, be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:
Provided that where a return in FORM GSTR-3B is required to be furnished by a person referred to in sub-rule (1) then such person shall not be required to furnish the return in FORM GSTR-3.
READ / DOWNLOAD ORDER:
***
[rainbow]Don’t miss the next GST Update / Article / Judicial pronouncement[/rainbow]
Subscribe to our newsletter from FREE to stay updated on GST Law
Resolve your GST queries from national level experts on GST free of cost.
Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
