GST Amendments

INPUT TAX CREDIT

Introduction of Section 16(2)(aa) and Substitution of Rule 36(4):
● ITC can be availed by a registered person only if:
● The supplier furnished the invoice/debit note details in their GSTR-1 statement and;
● These details have been communicated to the recipient under Section 37.
● Rule 36(4) has been substituted to reflect the amendment, stating that no ITC shall be
availed unless:
● The supplier furnished the invoice/debit note details in their GSTR-1 statement or
using the Invoice Furnishing Facility (IFF); and
● The input tax credit details have been communicated to the recipient in Form
GSTR-2B.

Introduction of Section 16(2)(ba)

● Section 16(2)(ba) is added, stipulating another condition for ITC availment.
● ITC can be availed by a registered person only if the input tax credit details communicated
under Section 38 have not been restricted.

Communication of details of inward supplies and input tax credit - Section 38

1. Section 38 deals with the communication of details of inward supplies and input tax credit
(ITC) to recipients of such supplies.
2. The new amendment adds an auto-generated statement containing details of ITC, which
will be made available electronically to the recipients of supplies in the prescribed form,
manner, time, and subject to conditions and restrictions.
3. The auto-generated statement under sub-section (1) will consist of:
a. Details of inward supplies where the credit of input tax may be available to the
recipient.
b. Details of supplies where the credit cannot be availed by the recipient, wholly or
partly, on account of the following reasons:
i. Registered person furnishing details under section 37(1) within the prescribed
registration period.
ii. Registered person defaulting in payment of tax, with the default continuing for
the prescribed period.
iii. Registered person's output tax payable exceeding the output tax paid during
the prescribed period by the prescribed limit.
iv. Registered person availing input tax credit that exceeds the allowed credit
during the prescribed period by the prescribed limit.
v. Registered person defaulting in discharging tax liability as per section 49(12),
subject to prescribed conditions and restrictions.
vi. Other prescribed classes of persons.

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Section 38 in a nutshell
Section 38 of the GST Act deals with the communication of details of inward supplies and input
tax credit (ITC) to the recipients of such supplies. It ensures that recipients receive an
electronically generated statement containing the details of ITC. This statement comprises:
1. Details of inward supplies where the credit of input tax may be available to the recipient.
2. Details of supplies where the credit cannot be availed by the recipient, either wholly or
partly, due to various reasons such as default in payment of tax, discrepancies in output tax
payable and paid, excess input tax credit claimed, and other prescribed classes of persons.

Time limit for availment of ITC by a registered person in respect of any

invoice/debit note pertaining to a FY extended upto 30 th November of the
following FY [Section 16(4) amended]

Previously, Section 16(4) stated that a registered person would not be entitled to take ITC in
respect of any invoice or debit note for the supply of goods or services after the due date of
furnishing the return under Section 39 for the month of September following the end of the
financial year to which the invoice or debit note pertained, or furnishing the relevant annual return,
whichever came earlier.

With effect from October 1, 2022, the amended Section 16(4) simplifies the deadline for ITC
availment by setting a fixed date of November 30th following the end of the financial year to
which the invoice or debit note pertains, or the furnishing of the relevant annual return,
whichever is earlier.

Example 1: Under the old provision

Assume a registered person has an invoice dated 15th January 2021, for which they want to
claim input tax credit. The financial year for this invoice is 2020-21.

As per the old provision, the due date for claiming ITC is the due date of furnishing the return
under Section 39 for the month of September following the end of the financial year. In this case,
the due date would be the due date for filing the GSTR-3B return for September 2021 (generally,
20th October 2021) or the date of filing the relevant annual return for the financial year 2020-21,
whichever is earlier.

Example 2: Under the new provision

Now, let's consider the same scenario but with the new provision in place, effective from October
1, 2022. Assume a registered person has an invoice dated 15th January 2023, for which they
want to claim input tax credit. The financial year for this invoice is 2022-23.

As per the new provision, the deadline for claiming ITC is the 30th day of November following the
end of the financial year to which the invoice pertains or the date of filing the relevant annual
return, whichever is earlier. In this case, the deadline would be 30th November 2023 or the date of
filing the relevant annual return for the financial year 2022-23, whichever is earlier.

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Comparison:
The old provision relied on the due date of furnishing the return under Section 39 for September
following the end of the financial year, which could vary depending on changes in the GSTR-3B due
dates. The new provision simplifies the deadline by explicitly setting it at the 30th day of
November following the end of the financial year, providing greater clarity and consistency in the
deadline for claiming input tax credit on invoices and debit notes.

Date of issuance of debit note to determine the relevant financial year for the
purpose of section 16(4)

Section 16(4) Amendment: Date of Issuance of Debit Note

1. Background:
● Section 16(4) was amended through the Finance Act, 2020, effective from
01.01.2021.
● The amendment delinked the date of issuance of the debit note from the underlying
invoice date for availing ITC.
● Doubt arose regarding the relevant date for determining the financial year for section
16(4).
2. Relevant Dates for Financial Year Determination:
● Date of issuance of debit note (a)
● Date of issuance of underlying invoice (b)
3. Clarification by Circular No. 160/16/2021 GST:
● Effective from 01.01.2021, the date of issuance of the debit note determines the
relevant financial year for section 16(4).
● The date of the underlying invoice is not considered.
4. Example:
● Original invoice date: 16.03.2021 (FY 2020-21)
● Debit note date: 07.07.2021 (FY 2021-22)
● For the original invoice, the relevant financial year for availing ITC under section 16(4)
is FY 2020-21.
● For the debit note, the relevant financial year for availing ITC under section 16(4) is
FY 2021-22, as per the amended provision.
This amendment ensures that the date of issuance of the debit note determines the relevant
financial year for availing ITC under section 16(4), rather than the date of the underlying invoice.

Example: Titan Machines supplied an industrial mixer to GHI Ltd in the month of February under
the cover of an invoice dated 15th February 2022 for Rs 8,00,000 plus GST and performed
additional customization of the mixer as per GHI Ltd's requirements.

The amount chargeable for the customization services was covered in a debit note raised in the
month of May 2022 for Rs 1,20,000 plus GST. GHI Ltd files its annual return for each financial

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year in the month of December. The time-limit to avail ITC on Rs 8,00,000 in respect of tax paid
on the invoice dated 15th February 2022 would be 30th November 2022 (30th day of November
following the end of the financial year).

Since the debit note is received in FY 2022-23, the time limit for taking ITC available on Rs
1,20,000 is 30th November 2023 (30th day of November following the end of the financial year
to which the debit note pertains).

In this example, the time limits for availing ITC on the original invoice and the debit note issued
in the following financial year are different, with the debit note having an extended time limit for
ITC availment.

Proviso after section 17(5)(b)(iii) applies to entire section 17(5)(b)

17(5)(b)
the following supply of goods or services or both—
i. food and beverages, outdoor catering, beauty treatment, health services,
cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles,
vessels or aircraft referred to in clause (a) or clause (aa) except when used for
the purposes specified therein, life insurance and health insurance:
1. Provided that the input tax credit in respect of such goods or services
or both shall be available where an inward supply of such goods or
services or both is used by a registered person for making an outward
taxable supply of
a. the same category of goods or services or both or
b. as an element of a taxable composite or mixed supply;
ii. membership of a club, health and fitness centre; and
iii. travel benefits extended to employees on vacation such as leave or home
travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available,
where it is obligatory for an employer to provide the same to its employees under any law for the
time being in force.

The proviso after section 17(5)(b)(iii) is applicable to the entire section 17(5)(b)

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