ITC Claim in GSTR-3B
Gaurav Yadav

Updated on May 27th, 2024

This article delves into the complexities surrounding the time limits for claiming Input Tax Credit (ITC) in GSTR 3B. The eligibility for ITC has been a contentious issue in indirect tax laws, and despite promises of seamless credit flow in the GST regime, disputes have arisen. This piece particularly focuses on the interpretation of Section 16 (4) of the CGST Act, 2017. It explores scenarios where credit is denied due to the late filing of a particular return, such as GSTR-3B. The article aims to provide clarity on these issues and help taxpayers navigate the intricacies of ITC claims in the GST regime.

Applicability of The Time Limits Specified in Section 16(4) of the CGST Act, 2017, lays down the time limits for claiming ITC. According to this section, a registered person cannot claim ITC after the due date of furnishing the return under Section 39 for the month of September following the end of the financial year to which such invoice or invoice relating to such debit note pertains, or the date of furnishing the relevant annual return, whichever is earlier.

In simpler terms, businesses must claim ITC for a particular financial year before the due date of filing the GSTR-3B return for September of the following financial year or the date of filing the annual return, whichever is earlier. Failure to claim ITC within this timeline may result in the forfeiture of the ITC claim.

More on Section 16 & its ambiguous nature 

  • Section 16(1) of the CGST Act allows taxpayers to claim Input Tax Credit (ITC) subject to certain conditions, while Sections 16(2), 16(3), and 16(4) impose restrictions. 
  • Section 16(2) begins with the phrase "Notwithstanding anything contained in this section," indicating its overriding nature over the entire Section 16.
  • Section 16(4) introduces a time limit for availing the Input Tax Credit.

What’s the ambiguity?

There is ambiguity regarding the interpretation of "availment of ITC." Does it refer to claiming the credit in the books of accounts or disclosing it in the returns? This ambiguity has led to disputes between taxpayers and the tax authorities.

Taxpayers who claimed ITC in form GSTR 3B returns filed beyond the due dates mentioned in Section 16(4) (November or September, as applicable) have received notices under Section 73 of the CGST/SGST Act for reversal of ITC. The authorities argue that claiming ITC in late-filed returns violates the time limits prescribed in Section 16(4), thereby rendering the credit inadmissible.

Departments vs Taxpayer’s interpretation

The GST department's interpretation considers the disclosure of ITC in GSTR-3B as the "availment," whereas taxpayers may argue that the act of claiming ITC in their books of accounts constitutes "availment."

Case Laws on Time limit in GSTR 3B to claim ITC

Several court rulings have provided clarity on the applicability of these time limits and the consequences of non-compliance. Here is one of the few notable cases:

  1. Amit Cotton Industries v. Principal Commissioner of CGST & Central Excise (2022) (Source : M/S Amit Cotton Industries v. Principal Commissioner Of Customs | Gujarat High Court | Judgment | Law | CaseMine)
    In this case, the Gujarat High Court reiterated that the time limit specified in Section 16(4) is mandatory and not a directory. The court emphasized that ITC cannot be claimed after the expiry of the prescribed time limit, even if the delay is caused by factors beyond the taxpayer's control.
    This case law highlights the significance of adhering to the time limits specified in Section 16(4) of the CGST Act for claiming ITC. Businesses must carefully monitor their invoices and ensure timely ITC claims in the GSTR-3B returns to avoid potential financial implications and legal consequences.
    Businesses should implement robust internal processes and leverage technology solutions to streamline their ITC claim management and ensure compliance with the applicable time limits.
  1. Thirumalakonda Plywoods Vs Assistant Commissioner- State Tax (2022) (W.P.No.24235 of 2022 dated July 18, 2023)
    In this case, the High Court has made some important observations:
    (i) The time limit imposed under Section 16(4) of the Andhra Pradesh Goods and Services Tax (APGST) Act/Central Goods and Services Tax (CGST) Act, 2017, for claiming Input Tax Credit (ITC), does not violate Articles 14, 19(1)(g), and 300-A of the Constitution of India. This provision is in accordance with the principles of equality, freedom to practice any profession, and the right to property enshrined in the Constitution.
    (ii) Section 16(2) of the APGST/CGST Act, 2017, which begins with the phrase "Notwithstanding anything contained in this section," does not override or take precedence over Section 16(4) of the same Act. These two sections operate independently and do not contradict each other, as they govern different aspects of ITC claims.
    (iii) The mere acceptance of GSTR-3B returns with late fees by the tax authorities does not absolve or exonerate the delay in claiming ITC beyond the time limit specified under Section 16(4) of the APGST/CGST Act, 2017. The acceptance of late returns with fees does not automatically validate or legalize the late ITC claims that violate the statutory time limit prescribed in Section 16(4).

GSTR 1 vs GSTR 3B Reconciliation for accurate ITC claims

GSTR 1 vs GSTR 3B reconciliation is essential because the GSTR-1 return CAN NOT be filed if your previous tax period’s GSTR-3B is NOT filed

Hence, taxpayers must understand that the GSTR-3B vs GSTR-1 reconciliation is essential.

Reconciliation between GSTR-3B and GSTR-1 is required because :

  • To prevent incurring late fees and interest charges for underpayment or non-payment of taxes.
  • Ensures that there is no duplication of invoices and verifies that all invoices reported in your GSTR-1 (Outward Supplies) are accurately reflected in the GSTR-3B (Monthly Summary) return.
  • Simplified tax liability calculation on outward supplies for a particular tax period (monthly or quarterly).
  • Automated reconciliation platform like GSTHero streamlines the process and mitigates the risk of discrepancies between the two returns.
  • Errors or inconsistencies in the integrated taxes can be identified during the GSTR 3B filing process.
  • Allows your recipient to claim 100% Input Tax Credit under GST based on his GSTR-2B

To learn more on ‘Issues of mismatches in GST returns', check out our detailed blog in the link provided.

Inaccurate GSTR 3B filing attracts GST notices

  • One of the most common reasons for attracting GST notices is discrepancies between the information provided in your GSTR-1 (Outward Supplies) return and GSTR-3B (Monthly Summary) return.
  • Additionally, failing to file the GSTR-1 and GSTR-3B returns for nine consecutive months can also lead to the issuance of a GST notices.

Notice Specific to Non-Filing of GSTR-3B

In cases where a taxpayer defaults on filing the GSTR-3B return, the tax authorities may issue a GSTR-3A notice.

Response to GSTR-3A Notice

  • Upon receiving the GSTR-3A notice, taxpayers are required to file the defaulted GST returns within 15 days from the date of issuance of the notice.
  • The pending GST returns must be filed along with the applicable late fees and interest charges, if any.

GSTHero to your rescue!

Experience the power of seamless reconciliation with GSTHero’s GSTR 3B vs GSTR 1 reconciliation. This innovative tool simplifies your GST compliance by automatically comparing and reconciling your GSTR 3B and GSTR 1 filings.

GSTHero’s reconciliation tool :

  • Identifies mismatches & prevents potential errors
  • Ensures accurate Input Tax Credit in GST claims
  • Saves time by reducing manual effort, and focus on what matters most - growing your business.

Don’t let GST compliance slow you down. Choose GSTHero, your trusted partner for hassle-free GST reconciliation. Try it today!

To wrap up….

In this article, we have provided a comprehensive analysis of the complexities surrounding the time limits for claiming Input Tax Credit (ITC) in the form GSTR 3B. We have also showcased the ongoing disputes and interpretations of Section 16 (4) of the CGST Act, 2017. The article serves as a valuable resource for understanding the intricacies of ITC claims and the role of GSTR 3B in the GST regime.

Stay updated, stay ahead with GSTHero!

Until the next time…

Gaurav Yadav

About the author

Gaurav is an Engineer by training with a deep interest in Economics & Finance. He has been associated with the Fin-Tech industry for quite some time now. He writes for GSTHero for topics including GST Compliance, GST Structure, etc & aims to break down complicated technical jargon into simple terms for the taxpayers.

His expertise includes GST Laws, Corporate Finance & Macro-Economics.

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