Implementation of new Section 16(5) & (6) for availment of GST Credit for FYs 2017-18 to 2020-21

Summary

The transcript explains provisions under Section 16 Subsections 5 and 6 of the CGST Act, addressing GST credit claims. Section 16(5) allows taxpayers to reclaim credits barred by limitation, provided GSTR-3B was filed by November 30, 2021. Section 16(6) covers situations where taxpayers' registration is canceled, offering two pathways to avail of credit: filing returns before or after the November 30 deadline. Authorities are set to issue a circular clarifying the procedures and mechanisms for implementing these provisions, aimed at relieving taxpayers affected by credit limitations or canceled registrations.

Takeaways

• 😀 Section 16(5) provides relief to taxpayers whose GST credit is barred by limitation under section 16(4).
• 😀 The provision for the first four financial years (2017-18 to 2020-21) allowed credit under two conditions: due date of filing GST 3B (typically October 28) or due date for the annual return (31st December), whichever is earlier.
• 😀 Section 16(5) is now retrospective, effective from July 1, 2017, allowing taxpayers to claim credit if it was barred due to limitation.
• 😀 Credit benefit can only be availed if the credit was claimed through GST 3B, and the 3B must have been filed by November 30, 2021.
• 😀 The government plans to notify the procedure and mechanism for availing the disputed credit, which might be challenged by an audit notice, impugned order, or pending appeal.
• 😀 Section 16(6) provides a mechanism to avail credit for taxpayers whose registration was cancelled.
• 😀 If the cancellation date is before the relevant 30th November deadline of the succeeding financial year, the taxpayer must file returns from cancellation to revocation.
• 😀 If the 30th November deadline has passed, a special window is provided for the taxpayer to file all returns within 30 days after the revocation order.
• 😀 These provisions under sections 16(5) and 16(6) aim to support taxpayers whose credit was disallowed due to various circumstances.
• 😀 A circular will soon be issued to clarify the procedure and address various issues regarding the implementation of sections 16(5) and 16(6).

Q & A

What is the main purpose of Section 16 Subsection 5 of the CGST Act?

Section 16 Subsection 5 provides relief to taxpayers whose GST credit is barred by limitation under Section 16 Subsection 4. It allows taxpayers to avail of credit if certain conditions are met, including filing the necessary returns within specified deadlines.

What were the provisions for the initial four financial years (2017-2021) regarding GST credit?

During the financial years 2017-2021, the provisions stated that the credit was allowed based on the earliest of two dates: the due date of filing GSTR-3B for the month of September following the relevant financial year (usually 28th October) or the due date for the annual return (31st December).

How does Section 16 Subsection 5 apply retrospectively?

Section 16 Subsection 5 applies retrospectively from July 1, 2017, and allows taxpayers whose credit was barred by limitation to avail of the credit benefit. However, the credit is only provided if the taxpayer has filed GSTR-3B and the return was filed by November 30, 2021.

What is the significance of November 30, 2021, in relation to Section 16 Subsection 5?

November 30, 2021, is the deadline for taxpayers to have filed their GSTR-3B returns in order to avail of the credit under Section 16 Subsection 5. This date marks the cutoff for eligibility for credit under the retrospective provision.

What should taxpayers do to avail of the credit under Section 16 Subsection 5?

To avail of the credit under Section 16 Subsection 5, taxpayers must have filed their GSTR-3B returns and ensured they were filed by November 30, 2021. The government is also expected to issue a circular providing further details and the procedure for availing such credit.

What provision does Section 16 Subsection 6 of the CGST Act cover?

Section 16 Subsection 6 addresses the situation where a taxpayer's registration is canceled. It provides a mechanism for availing the credit that was barred due to the cancellation of registration, depending on whether the due date for filing returns is still open or has passed.

What is the procedure if a taxpayer’s registration gets canceled and the due date for filing returns has not passed?

If the registration is canceled and the due date for filing returns (November 30 of the succeeding financial year) has not passed, the taxpayer must file all their returns from the date of cancellation to the date of revocation in order to avail of the credit.

What happens if the due date for filing returns has already passed after the cancellation of registration?

If the due date has passed, the taxpayer is given a special window. Once the registration is revoked, the taxpayer must file all returns within 30 days from the revocation order, covering the period from cancellation to revocation.

What is the purpose of the circular that will be issued by the authorities regarding Section 16 Subsections 5 and 6?

The authorities are planning to issue a circular to clarify the procedure and provide further details on how taxpayers can avail of the credit under Section 16 Subsections 5 and 6. The circular will address issues related to the implementation of these provisions.

Why is the government recommending the issuance of a circular for Sections 16 Subsections 5 and 6?

The government is recommending the issuance of a circular to provide clarity on the procedure and to resolve any ambiguities that taxpayers may face in availing of the credit, particularly when dealing with situations like pending disputes or appeal processes.