Clarifying the issues regarding implementation of provisions of sub-section (5) and sub-section (6) in section 16 of CGST Act,2017.

Circular No.: 237/31/2024-GST
Date of Circular: 15th October 2024
Relevant Sections and Rules:

• CGST Act, 2017:
  • Section 16(4), 16(5), 16(6): Time limits and conditions for availing ITC
  • Section 29, 30, 73, 74, 107, 108, 148, 161, 168(1)
• Finance (No. 2) Act, 2024:
  • Section 118: Retrospective insertion of Section 16(5) and 16(6)
  • Section 150: Bar on refund due to retrospective amendment
• Notification: No. 22/2024 – Central Tax dated 08.10.2024

Clarification on Implementation of Retrospective Amendments to Section 16 – ITC Availment

1. Background:
   Sections 16(5) and 16(6) of CGST Act have been inserted retrospectively w.e.f. 01.07.2017, enabling taxpayers to:

• Claim ITC for FY 2017–18 to 2020–21 up to 30.11.2021 (under Section 16(5)), and
• Reclaim ITC after cancellation of registration if registration is later revoked (Section 16(6)).

However, Section 150 of the Finance Act, 2024 bars refund of any tax paid or ITC reversed due to non-availability of these provisions earlier.

Clarifications on Rectification and Relief Mechanism:

2. No Demand Notice Issued Yet (Preliminary Stage):
   Where investigation is ongoing but no DRC-01 notice under Section 73/74 has been issued:

• Proper officer must take note of retrospective changes and close the matter appropriately.
• Includes DRC-01A issued but no formal notice served.

3. Demand Notice Issued but No Final Order Yet:
   If a demand notice/statement has been issued under Section 73/74, but no final order:

• Adjudicating authority must consider Section 16(5)/(6) and issue a suitable order accordingly.

4. Final Order Passed; Appeal Filed (Pending Disposal):
   If order under Section 73/74 has been passed and appeal is pending under Section 107:

• Appellate authority shall take cognizance of retrospective amendments and pass a fresh order.

5. Revisional Proceedings Initiated but No Order Yet:
   If a revision is initiated under Section 108, but no order yet:

• Revisional authority must account for retrospective ITC allowance.

6. Final Order Passed; No Appeal Filed:
   Where taxpayer did not appeal against demand under Sections 73/74/107/108:

• Taxpayer may file a rectification application under special procedure in Notification No. 22/2024.
• Must be filed within 6 months from 08.10.2024.
• Filing process varies by order type (Section 73/74/107/108) via GST portal.
• Proforma (Annexure A) to be submitted with rectification request.

➤ Officer must issue rectified order in DRC-08 (for Sec. 73/74) or APL-04 (for Sec. 107/108)
➤ Decision to be made ideally within 3 months.

7. Important Conditions:

• Rectification limited to cases where ITC denial was solely due to Section 16(4).
• Officer may review other grounds of ITC ineligibility (e.g., fake invoices, ineligible input, etc.).
• No refund of tax/ITC already paid or reversed before this amendment (per Section 150).

8. Rejection Clause:
   If rectification application is filed but order doesn’t involve contravention of Section 16(4),
   ➤ It shall be summarily rejected with recorded reasons.

Source: Circular No.: 237/31/2024-GST