The CBIC has issued Clarification vide Circular No. 237/31/2024-GST dated 15.10.2024, regarding implementation of Section 16(5) and 16(6), relating to retrospective extension of time limits to claim ITC w.e.f. 01.07.2017. These sub-sections, inserted vide The Finance Act (No.2), 2024.
These Clarifications aim to resolve ambiguity regarding the retrospective amendments to Section 16 of the CGST Act and how taxpayers and authorities should handle past cases where demands were raised for the wrong availment of ITC due to contravention of Section 16(4). These are as under:
1. Cases Without Demand Notice/Statement Issued u/s 73 and 74 of the CGST Act
If any investigation or proceedings for wrong ITC availment (alleging violation of Section 16(4)) have been initiated but no formal demand notice/statement has been issued, the tax authorities are required to take cognizance of the retrospectively inserted sub-sections (5) or (6) of Section 16, which now entitles taxpayers to avail ITC – Proper officers should take appropriate actions under these new provisions, including situations where FORM DRC-01A, has been issued, but no demand notice under Section 73 or 74 has followed.
2. Cases Where Demand Notice/Statement Issued, but no Order under Section 73/74
If a demand notice or statement has been issued under Section 73 or 74 but no order has been passed by the adjudicating authority, they should recognize the new sub-sections (5) or (6) – The adjudicating authority must pass appropriate orders, considering these retrospective changes.
3. Cases Where Order Issued under Section 73/74 and Appeal Filed, but no Order under Section 107 of the CGST Act, 2017
Where an order has been passed under Section 73 or 74 and an appeal has been filed under Section 107, but no appellate order has been issued – The Appellate authority must now consider the retrospective amendments in sub-sections (5) or (6).
4. Cases Where Revisional Authority Proceedings Initiated, but no Order under Section 108
In cases where proceedings have been initiated by the Revisional Authority under Section 108, but no order has been issued – the Revisional Authority should also consider the retrospective provisions of sub-sections (5) or (6) and pass appropriate orders.
5. Cases Where Orders Issued and No Appeal Filed or Appeal Tribunal Pending
f an order has already been issued under Section 73, 74, 107, or 108, confirming a demand for ITC wrongfully availed in contravention of Section 16(4), but no appeal has been filed, or no appeal has been filed with the Appellate Tribunal – taxpayers are still entitled to rectify the order under the special procedure notified by Notification No. 22/2024 (within 6 months)
7. Procedure for Filing Applications for Rectification:
A. Rectification Process for Orders Involving ITC Contravention under Section 16(4)
- Taxpayers whose ITC claims were denied due to violations of Section 16(4) but are now eligible for ITC under the amended Section 16(5) or (6) can apply for rectification of past orders using the special procedure notified by Notification No. 22/2024 dated 08.10.2024
- Such Applications must be filed within six months from the notification date.
- Taxpayers can submit rectification requests electronically on the GST portal, following the steps mentioned in this Circular. Also, submit information as per Annexure A, detailing the demand confirmed due to wrong ITC claims, which is now eligible under amended provisions.
- Proper officer who passed the original order will handle the rectification and issue a new order, ideally within three months of the application
- For rectified orders under Sections 73 or 74, a summary will be uploaded in FORM DRC-08. For orders under Sections 107 or 108, it will be in FORM GST APL-04.
- If rectification adversely affects the taxpayer, the principles of natural justice will apply. This means that the taxpayer will have the opportunity to be heard before any adverse order is passed.
- Taxpayer can file an appeal under Section 107 or Section 112, in case rectified order adversely impacts.
- No refund will be granted for taxes already paid or ITC reversed, even if the ITC is now eligible due to the retrospective amendments in Section 16(5) and 16(6).
B. Limitations on Special Rectification Procedure: The rectification process outlined in Notification No. 22/2024 applies only to cases involving ITC denial due to contravention of Section 16(4) where ITC is now allowed under Section 16(5) or (6). If a taxpayer applies for rectification in a case where Section 16(4) contravention is not involved, the application will be summarily rejected with the remark that it does not fall under the special rectification procedure.
The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/10/Circular-No-237-2024.pdf
