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The Goods and Services Tax, 2017 is a progressive taxation regime that changed the face of indirect taxation. After the implementation of the GST Law on 1st July 2017, many changes were made with regards to tax payments, much to the relief of the taxpayer. Input Tax Credit has always been a major focus area of the government.

Many a time, businesses fail to avail the input tax credit under GST that they are eligible for while filing returns. But the law stipulates a certain deadline after which ITC cannot be claimed. What is this deadline and what shall happen to the ITC if not availed on time?

Before proceeding with the above questions, let’s understand how the input tax credit mechanism works.

The Mechanism of Input Tax Credit Under GST

When the supplier files the GSTR-1 or Invoice Furnishing Facility (IFF), the ITC gets reflected in the recipient’s GSTR-2A/2B. This ITC gets auto-populated in the recipient’s GSTR-3B and is the amount of ITC that the recipient is eligible to claim.

How can Mismatch Occur?

There might be instances when a supplier misses uploading the invoice in the GSTR-1. In such a case, the ITC does not get reflected in the GSTR-2A of the recipient. Also, the recipient might make an error due to which he/she forgets to claim the ITC for a particular invoice.

What is the Remedy?

The GST input tax credit rules and laws specify the period within which all the changes concerning a particular financial year can be made. Till now, the recipients can claim the ITC for a particular financial year till the due date of filing the returns for September, following such a financial year or the date of filing the annual return, whichever is earlier. The Finance Bill, 2022 amended that date to be the 30th of November. 

Therefore, if a recipient forgets to claim the ITC for a particular financial year, they are eligible to claim it till the 30th of November, of the subsequent financial year (as per the amendment proposed). After the 30th of November, the recipient shall not be eligible to claim that ITC.

Benefits of the Deadline

Following are the benefits of this deadline:

  • The government has provided recipients with sufficient time to claim an ITC that they had missed, while filing the returns during the financial year.

  • The period till the due date of the return for September (30th November as per the amendment) also applies to the supplier. In case the supplier has erred in uploading a particular invoice or furnished an incorrect amount, or erred in issuing or uploading a debit or credit note, the error can be rectified till the said deadline. Therefore, this provides sufficient time even after the end of the financial year to rectify the mistake.

Drawbacks of the Deadline

While the deadline buys the supplier and recipient sufficient time, it certainly has its drawbacks:

  • Once the deadline passes, no changes can be done to the information furnished in the return. Thus, if the recipient does not correct their mistake and claims the ITC till the deadline, then they would be left with no option but to give up the ITC.

  • If the supplier does not file the return, or fails to upload the invoice in GSTR-1 till the deadline, then the ITC won’t be reflected in GSTR-2A/2B of the recipient. Thus, a recipient who is regular in compliance with GST laws and return filings will be left with no choice but to give up the ITC because of the supplier’s error in filing the returns or uploading the invoice.

  • Even the amendments in GSTR-1 can be carried out till the deadline. Therefore, in case of an error in the tax amount which comes to the notice after the deadline, no correction would be possible.

Is The Rule to Claim ITC Within A Deadline Justifiable

After going through the ITC rules under GST, as well as the associated benefits and drawbacks of the rule, it can be inferred that while a fixed deadline is beneficial in terms of providing sufficient time to the supplier as well as the recipient in rectifying the mistake, once the deadline expires, neither have a choice. This is a major drawback and therefore demands accuracy in furnishing the information while filing the GST returns. Under the GST law, mistakes are allowed to be rectified but only up to a certain point.

Bottom Line

The GST ITC claim rules regulate the entire input tax credit mechanism. The taxpayers need to accurately ensure compliances. Proper reconciliation of book and GST returns can help you maintain accuracy in filing your GST returns.WeP Digital provides complete GST solutions to mitigate your GST filing worries. With the WeP ASP software driving the entire process, it has become seamless with varied user-friendly features.

WeP managed GST Filing Services can help you with the following tasks

  • Filing your monthly GST returns. This includes the latest changes in the portal and multiple data validation in order to ensure that the return is filed error-free.

  • Filing your Annual Return (GSTR-9) assisted by an expert team to gather and fill the requisite information.

  • Availing optimum ITC. This includes:

    • Reconciliation of GSTR-2 vs GSTR-2A and GSTR-6 vs GSTR-6A

    • Reconciliation of amended data

    • Matching of invoices

    • Notification to vendors in case of mismatches

    • Summary generation and detailed reports

  • Comparison of various returns. This will help you highlight the variances before the deadline and assist in rectifying the details. This includes

  • GSTR-3B vs GSTR-1

  • GSTR-3B vs GSTR-2

  • GSTR-3B vs GSTR-2A

  • GSTR-1 vs E-way bills

Always ensure that your GST returns are filed accurately because not complying with the law can lead to unnecessary fines and penalties.