Wrong availment of Income Tax Credit lead to the decision by 54th GST Council Meeting

The Union Finance Minister Nirmala Sitharaman chaired the 54th meeting of the GST Council today ( 9th September 2024 ) at Sushma Swaraj Bhawan in New Delhi. The Union Minister of State for Finance M.P.P. Chaudhary, along with the Chief Ministers of Goa and Meghalaya, and the Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana also participated in the meeting. The 54th GST Council meeting recommended various rectification processes related to the Input Tax Credit ( ITC ) under section 73, 74, 107 and 108 of the Central Goods and Services Tax Act, 2017. Get a Copy of GST Manual (Acts & Rules), Click here The Council recommended that section 118 and 150 of the Finance ( No.2 ) Act, 2024, which provides for insertion of sub-section (5) and sub-section (6) in Section 16 of Central Goods and Services Tax Act, 2017 ( CGST,2017 ) retrospectively w.e.f 01.07.2017, may be notified at the earliest. Issues related to wrong availment of Input Tax Credit ( ITC ) by the taxpayers has motivated the Council to take necessary actions on this. The council also  recommended special procedure for rectification of orders u/s 148 of the CGST Act, 2017, to be followed by the class of taxable persons, against whom any order u/s 73 or 74 or section 107 or 108 of  CGST Act has been issued confirming demand for wrong availment of ITC on account of contravention of provisions of sub-section (4) of section 16 of the CGST Act, but where such ITC is now available as per provisions of sub-section (5) or sub-section (6) of section 16 of CGST Act, and where appeal against the said order has not been filed. Get a Copy of GST Manual (Acts & Rules), Click here The wrong availment of ITC, due to non-filing of returns by the sellers has caused a lot of trouble for the buyers. Section 16(4), CGST Act has succeeded in reducing these issues in related to the availment of ITC to an extent, but still the wrong person being issued the notice u/s 73, 74, 107 and 108 of CGST Act, is a very common mistake. So the introduction of 16(5) and 16(6) of CGST Act, 2017 inserted by section 118 and 150 of the Finance(No.2) Act, 2024 will resolve the issues on availment of ITC. According to Section 16(5) and 16(6) CGST Act : (5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the thirtieth day of November, 2021. Get a Copy of GST Manual (Acts & Rules), Click here (6) Where registration of a registered person is canceled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,–             (i) filed up to thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or             (ii) for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is later.] The Council also recommended issuance of a circular to clarify the procedure and issues related to the implementation of the provision of 16(5) and 16(6) of CGST Act, 2017.