CBIC Circular No. 211/5/2024-GST: Time Limit for ITC on RCM Supplies

The CBIC has issued Circular No. 211/5/2024-GST dated June 26, 2024, clarifying the time limit under Section 16(4) of the CGST Act, 2017 concerning reverse charge mechanism (RCM) supplies received from unregistered persons.

Issues were raised by trade and industry regarding the applicability of the time limit for claiming input tax credit (ITC) under Section 16(4) of the CGST Act in cases where recipients paid tax on RCM basis for services received from unregistered suppliers after an initial delay, often due to subsequent clarifications or audits prompting retrospective invoicing and tax payment.

The CBIC clarifies that Section 16(4) links ITC availment to the financial year of invoice issuance under Section 31(3)(f) of the CGST Act, which mandates recipients to self-invoice and pay taxes on such supplies. The amendment through the Finance Act, 2022, specifies that ITC cannot be claimed after November 30th following the end of the relevant financial year, or after filing the annual return, whichever comes first.

Therefore, for supplies under RCM from unregistered suppliers where delayed invoicing occurs, the relevant financial year for ITC calculation is that in which the recipient issues the invoice under Section 31(3)(f). Interest and penalties may apply for late payment and invoicing.

Trade notices are recommended for disseminating the circular’s details effectively.