The Goods and Services Tax (GST) Council, in its 54th meeting on September 9, 2024, recommended that Sections 118 and 150 of the Finance (No. 2) Act, 2024, which amend the Central Goods and Services Tax (CGST) Act, 2017 by inserting sub-sections (5) and (6) into Section 16, should be notified at the earliest. This insertion is to be applied retrospectively from July 1, 2017.
In response, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 22/2024-Central Tax on October 8, 2024, which specifies the mechanism for implementing these amendments. The notification outlines a special procedure for rectifying orders concerning wrong availment of Input Tax Credit (ITC) under the newly inserted provisions. Below is a detailed breakdown of the notification and its implications.
Key Amendments to Section 16 of the CGST Act, 2017
Overview of Sub-sections (5) and (6)
The newly inserted sub-sections (5) and (6) in Section 16 provide retrospective relief to taxpayers by allowing certain input tax credits that were previously disallowed under sub-section (4). These amendments aim to rectify situations where credits were wrongly availed but now qualify under the updated provisions.
| Sub-section | Description |
|---|---|
| Sub-section (5) | Permits the availment of input tax credit if the recipient has not received the tax invoice but the conditions of sub-section (2) are met. |
| Sub-section (6) | Permits ITC availment even if the recipient has not paid the supplier within the stipulated period, provided the tax has been deposited with the government. |
Special Procedure for Rectification of Orders
In exercise of the powers under Section 148 of the CGST Act, the Central Government, on the recommendation of the GST Council, has laid down a special procedure for rectification of orders issued under the following sections:
| Section | Description |
|---|---|
| Section 73 | Deals with tax not paid or short-paid or ITC wrongly availed without intention to evade tax. |
| Section 74 | Pertains to cases of tax not paid, short-paid, or ITC wrongly availed with intention to evade tax. |
| Section 107 | Relates to appeals against orders passed by adjudicating authorities. |
| Section 108 | Covers appeals made to the Appellate Authority or Appellate Tribunal. |
Steps for Rectification
- Application Filing:
- The affected person must file an electronic application on the common portal within six months from the date of issuance of this notification.
- The application should rectify orders issued under Sections 73, 74, 107, or 108 for wrong availment of ITC due to contravention of sub-section (4) of Section 16, but where ITC is now allowed under sub-sections (5) or (6) of Section 16.
- The application must be accompanied by Annexure A, containing all relevant information.
- Processing by the Proper Officer:
- The officer who issued the original order will be responsible for processing the rectification application.
- The officer is expected to issue a rectified order within three months from the date of application, wherever possible.
- Forms for Rectified Orders:
- If the rectified order relates to demands under Section 73 or 74, it should be uploaded in FORM GST DRC-08.
- If the rectification pertains to orders issued under Section 107 or 108, it must be uploaded in FORM GST APL-04.
- Scope of Rectification:
- Rectification is limited to the demand of input tax credit that was wrongly availed due to the contravention of sub-section (4) of Section 16, but which is now valid under sub-sections (5) or (6).
- Principles of Natural Justice:
- If the rectification order adversely affects the registered person, the principles of natural justice must be followed, ensuring fair hearings and decisions.
Table: Key Deadlines for Taxpayers and Authorities
| Event | Deadline |
|---|---|
| Filing application for rectification | Within 6 months of the notification (by April 8, 2025) |
| Issuance of rectified order by the proper officer | Within 3 months of the date of application |
Impact and Importance
The implementation of sub-sections (5) and (6) of Section 16 is a significant step toward addressing the concerns of taxpayers who were denied ITC due to technical non-compliance with sub-section (4). The rectification mechanism ensures that taxpayers can now avail of ITC that is legitimately due to them under the new provisions.
The special procedure facilitates the rectification of past orders where taxpayers may have been penalized for wrong availment of ITC, despite such ITC being valid under the updated law. This provides relief to a large section of taxpayers and reinforces the government’s commitment to making the GST regime more taxpayer-friendly.
The rectification procedure laid out by the CBIC under Notification No. 22/2024 is an essential mechanism for correcting past discrepancies in ITC availment due to the retrospective application of new sub-sections in the CGST Act. Taxpayers are advised to act promptly within the given timelines to ensure they benefit from the relief provided under this notification.
For more information or guidance, registered persons should refer to the relevant sections of the CGST Act and consult their tax advisors for compliance with the new rules.
Visit www.cagurujiclasses.com for practical courses
