Can I claim the ITC of RCM in next year?

Can I claim the ITC of RCM in next year?

Many taxpayers missed the ITC on GTA, advocate fees, or Director supplies. Now they have this big question, Can I claim the ITC of RCM in next year? One of the most important questions. In short, I can say whether section 16(4) applies to RCM supplies. This section is already challenged. It provides for the time limit to avail ITC pertaining to invoices for the last FY. A time limit up to September is the due date of GSTR 3b for September.

“A registered person shall not be entitled to take input tax credit 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 under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.”

Every single word of this provision is important. It bars the eligibility of ITC for some invoices. Let us understand by an example:

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Input tax credit in respect of any invoice or debit note

An invoice was issued on 1st March 2020. The ITC of this invoice can be claimed in GSTR 3b by the last date of filing of return in GSTR 3b for September month. It is on the 20th of next month. Thus the last date is 20th October. It is irrespective of actual filing.

such invoice or invoice relating to such debit note pertains

Now let us move to the second drill. The last date for raising an invoice is before the start of the movement. Goods dispatched on 1st march 2020 but the invoice was not raised. It was raised in April 2020. Can we take its ITC in this case after the prescribed date? The invoice pertains to the month of March. You cant connect it to another month by delaying its issuance. Thus in this case ITC is not available.

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ITC of RCM in next year:

Now in the case of RCM, there can be two scenarios. First is the supplier is registered and he is required to raise the invoice. But in the case of a URD supplier, the recipient is required to take the ITC based on the self invoice. Section 31(3)(f) read with rule 36 provide for it. The recipient is required to raise a self invoice. He can claim the ITC based on that invoice. But the interesting thing is that there is no time limit to raise a self invoice. But the question is whether the time limit u/s 31(1) or (2) can apply in this case. If I check the provision, section 31(3) starts with “notwithstanding anything in subsection (2)&(3)”. But then the interpretation of notwithstanding shall be purposive. It should be avoided to the extent it’s repugnant to the context, it will wipe it out. Thus in this case we can assume that the time limit for issuance of invoice in FCM is applicable in RCM also. ITC in this case is also restricted to the time limit of the invoice.

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RCM on services by a Director in GST

Thus in case of RCM from unregistered person, ITC can be availed whenever an invoice is raised. The time limit of section 16(4) is not applicable in this case. Even if an invoice is raised in say next year. ITC of that invoice is available. In this case, the tax-paying document is a self invoice. It is covered by section 16 to be a document to avail ITC.

Tax Credits Claim Return Deduction Refund Concept