Interpreting Section 16 (4) Of CGST ACT, 2017

Input tax credit forms the core of any indirect tax legislation. It removes the cascading effect of indirect tax structure and permits a seamless flow of transactions across the entire transaction chain. While ITC is a substantial benefit granted by the law and thus, a right of the taxpayer, the said right has to be exercised within reasonable time as prescribed by the Statute. Section 16(4) of the CGST Act, 2017 prescribes the said timeline and reads as under:

(4) A registered person shall not be entitled to take the input tax credit in respect of any invoice or debit note for the supply of goods or services or both after the [30^th day of November]¹ following the end of the financial year to which such invoice or [invoice relating to such]² debit note pertains or furnishing of the relevant annual return, whichever is earlier.

[Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September 2018 till the due date of furnishing of the return under the said section for the month of March 2019 in respect of any invoice or invoice relating to such debit note for the supply of goods or services or both made during