Summary
CBIC has issued a circular clarifying the implementation of retrospectively inserted provisions of section 16(5) and 16(6) of the CGST Act relating to availment of input tax credit in cases where ITC was denied due to time limit prescribed under section 16(4).
Official circular issued by the Central Board of Indirect Taxes and Customs (CBIC) clarifying the procedure for availing input tax credit pursuant to retrospective amendments made to section 16 of the CGST Act by the Finance (No. 2) Act, 2024.
Refer the attached PDF for complete text and clarification.
Frequently Asked Questions
CBIC Circular No. 237/31/2024-GST clarifies the implementation of retrospectively inserted Section 16(5) and 16(6) of the CGST Act, introduced via Finance (No. 2) Act, 2024. It provides procedural guidance for taxpayers who were denied Input Tax Credit (ITC) due to the time limit restrictions under Section 16(4). The circular explains how such taxpayers can now avail previously denied ITC following the retrospective amendment.
Section 16(5), retrospectively inserted by Finance (No. 2) Act, 2024, allows taxpayers to claim ITC for FY 2017-18 to FY 2020-21 where ITC was blocked solely due to the time limit under Section 16(4). This provision provides significant relief to taxpayers who faced demand notices or had ITC reversed for invoices pertaining to these financial years, effectively overriding the earlier time-bar restrictions.
Taxpayers whose ITC was denied or reversed solely due to Section 16(4) time limits can now reclaim such ITC following CBIC Circular 237/31/2024. They may need to file rectification applications or revise their returns as per the prescribed procedure. Taxpayers who received demand orders for ITC reversal under Section 16(4) can seek relief by approaching the GST authorities, citing the retrospective applicability of Section 16(5) and 16(6).
Yes, Section 16(6), retrospectively inserted by Finance (No. 2) Act, 2024, provides relief where GST registration was cancelled and subsequently restored. It clarifies that ITC for the period during which registration was cancelled shall be available once registration is restored, removing the restriction that previously denied ITC due to lapsed registration. CBIC Circular 237/31/2024-GST further clarifies the procedural steps for availing such ITC.
Yes, as per the retrospective amendment and CBIC Circular 237/31/2024-GST, pending demand notices, appeals, or recovery proceedings initiated solely for ITC denial under Section 16(4) for FY 2017-18 to 2020-21 should be dropped or resolved in taxpayer's favour. Taxpayers with finalized orders may also seek rectification. However, cases involving other ITC eligibility conditions beyond time limits may still be subject to scrutiny and are not covered by this relief.