Clarification on GST related issues as stated by Circular No. 160/16/2021

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Circular No. 160/16/2021-GST dated 20th September, 2021 published by the CBIC, has imparted a clarification in respect of certain GST related issues. Clarification with respect to section 16(4) for Debit Notes, Carrying physical copy of E-Invoice during transportation & refund of GST on goods where export duty is applicable, has been provided.

➤ Availment of ITC on debit notes

The Section 16(4) of the CGST Act, 2017 was amended vide the Finance Act, 2020, so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit w.e.f 01.01.2021. The line of amendment that was made stated:

“A registered person shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return u/s 39 for the month of September following the end of FY to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.”

Following issues were raised for clarification:

➔ Which of the following dates are relevant to determine the ‘financial year’ for the purpose of section 16(4):

- the date of issuance of debit note or the date of issuance of the underlying invoice.

Clarification :

In case of debit notes,the date of issuance of debit note (not the date of underlying invoice)

shall determine the relevant financial year for the purpose of sec. 16(4) in which the ITC has to be claimed.

➔ The other issue related was whether any availment of input tax credit, on or after 01st January 2021, in respect of debit notes issued either prior to or after 01st January 2021, will be governed by the provisions of the amended Section 16(4), or the amended provision will be applicable only in respect of the debit notes issued after the same date?

Clarification :

The availability of Input Tax Credit on debit notes in respect of amended provision shall be applicable from 01st January 2021. Accordingly, for availment of ITC on or after 01st January 2021, one has to only see the date of issue of the debit note.

If the debit note is issued after 01st January 2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4), else for Debit note issued prior to 01st January 2021, the provisions of section 16(4), as it existed before the said amendment on 01st January 2021.

➤ Carrying of physical copy of invoice during movement of goods:

➔ The confusion was raised whether carrying physical copy of invoice is mandatory during movement of goods in cases where suppliers have issued invoices in the manner prescribed under rule 48 (4) of the CGST Rules, 2017 (i.e. in cases of e-invoice)

Clarification :

138A (1) of the CGST Rules, 2017 inter-alia, provides that the person in charge of a conveyance shall carry—

(a) the invoice or bill of supply or delivery challan, as the case may be, &

(b) a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner.

But, Rule 138A (2) of the CGST Rules, 2017, after being amended notified that - In case, invoice is issued in the manner prescribed under sub-rule (4) of rule 48, the QR code having an inserted Invoice Reference Number in it, may be electronically produced, for verification by the proper officer instead of the physical copy of such tax invoice.

Hence, there seems no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier on obtaining an IRN and by uploading information contained therein on the Common Portal and production of the QR code having an inserted IRN  electronically, for the confirmation during movement of Goods would be adequate.

➤ Refunds of accumulated ITC where Goods are subject to Exports Duty:

➔ There was a confusion regarding whether the first proviso to Section 54(3) of the CGST or SGST Act, 2017 prohibiting the refund of unutilized ITC is applicable in case of exports of goods which are having NIL rate of export duty.

Clarification :

It was stated that the goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, shall only be covered under the restriction imposed by the section 54(3) from availment of refund of accumulated Input Tax Credit.

On the other hand, the goods which are not subject to any export duty and in respect of which either ‘NIL’ rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered under the imposed restriction by the first proviso to section 54(3) of the CGST Act for the purpose of availment of refund of accumulated ITC.