New GSTN advisory: You can now file a rectification application to claim pending input tax credit; However, there is a catch GSTN said, "A functionality has now been made available on the Portal for taxpayers to file an application for rectification of such orders issued under section 73/74."
Good news for GST registered taxpayers who filed GSTR-3B to claim pending input tax credit (ITC) for FY 17-18, 18-19, 19-20 and 20-21 but were prevented from claiming it due to due date related issues. Many of these taxpayers received GST demand notice because they did not file GSTR-3B return on or before the deadline. As per the GST law input tax credit (ITC) can't be claimed without filing GSTR-3B return. One issue led to another. Without getting the benefit of ITC their final output tax liability increased unnecessarily.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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The government understood this pain point and announced an Amnesty Scheme in Budget 2024, to allow these taxpayers to claim past years' pending input tax credit by following a special rectification process. Subsequently, a circular was issued on October 8, 2024 outlining the working mechanism of this Amnesty scheme. GSTN has now implemented the online rectification filing process from January 07. The deadline for doing this is on or before April 8, 2025.
The Goods and Services Tax Network (GSTN) in a new advisory informed taxpayers who want their pending input tax credit for the specified years, a rectification application is required to be filed to modify the GST tax demand notice which is what prevented the taxpayer from claiming pending input tax credit for the specified financial years.
This rectification application once processed by the tax department will release the pending past year's input tax credits and also rectify the GST tax order to nil demand.
However, there is a catch.
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What's the catch?
The catch is you must have filed GSTR-3B on or before November 30, 2021, for the tax period FY 2017-18, 18-19, 19-20 and 20-21.According to Chartered Accountant Bimal Jain, founder, A2Z Taxcorp LLP, "The government with an aim to give relief to these taxpayers has come out with an GST Amnesty Scheme under section 16 (5). This relief implemented by GSTN yesterday, can only be availed by taxpayers if they had filed GSTR-3B on or before November 30, 2021, for the tax period 2017-18, 18-19, 19-20 and 20-21. To claim these specified tax periods pending input tax credit the taxpayer needs to file a rectification request on the GST portal within 6 months from October 8, 2024, i.e. April 8, 2025. The GST proper officer will process this rectification application within three months from the date of filing the application."
By filing this application, all specified GST tax demands will stand rectified and become nil and the pending input tax credit of all these past tax periods will be credited to their GST ledger. Though you can't get this input tax credit in your bank account, you can use it to settle your present final GST tax liability.
Process to claim past years' pending input tax credit
According to the GSTN advisory dated January 7, 2025, you need to download the proforma in Annexure A in word format and then upload it after filing the details of the tax demand order and input tax credit wrongly availed.GSTN said: "A functionality has now been made available on the Portal for taxpayers to file an application for rectification of such orders issued under section 73/74. They can file it, post login, by navigating Services > User Services > My Applications, selecting "Application for rectification of order" in the Application Type field, and clicking on the NEW APPLICATION button. A hyperlink has also been provided on the Portal to download the proforma in Annexure A in word format, required to be uploaded after entering details of the demand order of the ITC wrongly availed…while filing the application for rectification."
Here's a step-by-step guide:
Step 1: Access the www.gst.gov.in URL and login to the portal with valid credentials. Then click Dashboard > Services > User Services > My Applications.
Step 1- Rectification applicationSource: GSTN
Step 2: Select "Application for rectification of order" in the Application Type field and click the 'NEW APPLICATION' button and then enter the details as seen from the image below. Complete the filing process by clicking on 'PREVIEW' and then 'FILE'.
Rectification application to claim pending input tax creditSource: GSTN
Chartered Accountant Ashish Karundia says: "The benefit of the notification dated October 8, 2024, is available to all taxpayers against whom an order has been issued by the proper officer under sections 73/74, or by the Appellate authority under section 107, or by the Revisional authority under section 108. However, the benefit is only applicable to the demand related to ITC incorrectly claimed beyond the time limit under section 16(4), which is now eligible under sections 16(5)/16(6)."
Barnala, Punjab based Chartered Accountant Himank Singla, partner, SBHS & associates says, "In a significant and much-awaited move, the government has launched the online rectification facility, effective from January 7, 2024 on the GST Portal - to assist taxpayers in rectifying past Input Tax Credit (ITC) claims related to Section 16(4). This follows the provisions of Notification No. 22/2024-CT, issued on October 8, 2024, which introduced special procedures for taxpayers who received orders under sections 73 or 74 of the CGST Act for the wrongful availment of ITC."
Singla says, "The amendments, introduced through the Budget 2024, added sub-sections (5) and (6) to Section 16 of the CGST Act, 2017. Sub-section (5) addresses ITC claims for late return filings by regular taxpayers, while sub-section (6) applies to those whose registrations were cancelled under Section 29 and later reinstated under Section 30. These provisions aim to regularize ITC claims that were previously disallowed due to the time constraints outlined in Section 16(4)."
Singla says, "The launch of this online facility is a step forward in streamlining compliance, but the limited timeframe underscores the need for prompt action. Taxpayers and authorities must work together to address any initial challenges and ensure a seamless rectification process, allowing businesses to benefit fully from the extended ITC provisions."
What did the Finance Ministry say about this special rectification of GST demand notices
Ministry of Finance said in the circular dated October 8, 2024: "…hereby notifies the following special procedure for rectification of order, to be followed by the class of registered persons, against whom any order under section 73 or section 74 or section 107 or section 108 of the said Act has been issued confirming demand for wrong availment of input tax credit…. but where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the said Act, and where appeal against the said order has not been filed…"The Finance Ministry said: "The said person shall file, electronically on the common portal, within a period of six months from the date of issuance of this notification, an application for rectification of an order issued under section 73 or section 74 or section 107 or section 108 of the said Act, as the case may be, confirming demand for wrong availment of input tax credit, on account of contravention of provisions of sub-section (4) of section 16 of the said Act, but where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the said Act, and where appeal against the said order has not been filed. The said person shall, along with the said application, upload the information in the proforma in Annexure A of this notification."
Singla explains, "Circular No. 237/31/2024 dated 15th October 2024 further clarified that in cases where order under section 73 or section 74 of the CGST Act had been issued but no appeal against the said order has been filed with the Appellate Authority, or where the order under section 107 or section 108 of the CGST Act has been issued by the Appellate Authority or the Revisional Authority but no appeal against the said order has been filed with the Appellate Tribunal, such taxpayers who have received an order under sections 73, 74, 107, or 108 of the CGST Act confirming a demand for wrong availment of input tax credit due to a violation of sub-section (4) of section 16 can now apply for rectification. This applies if the input tax credit is available under sub-sections (5) or (6) of section 16, and no appeal against the order has been filed. The application for rectification should follow the special procedure outlined in section 148 of the CGST Act as per Notification No. 22/2024 – Central Tax, issued on October 8, 2024, and must be submitted within six months from the notification date."
Why experts feel there is a problem in the implementation of this Scheme
According to Jain, the due date of furnishing the GSTR-3B return is November 30 or the due date of furnishing the GST annual return (December 31) whichever is earlier. If an eligible taxpayer could not file GSTR-3B return on or before the deadline then they couldn't claim input tax credit ever for the given tax period.Karundia says: "If the taxpayer has already settled the demand related to ITC claimed beyond the previous permissible limit by either paying in cash or reversing the ITC, they cannot reclaim the ITC or receive a refund for the same."
Jain says: "The problem with this Amnesty Scheme is that once an adverse order is passed by the GST proper officer and the taxpayer has settled the order by forgoing claim on ITC and paying the tax demand then now these taxpayers will not get the benefit. It essentially means those taxpayers who gave up the fight and accepted the GST demand notice will not get any benefit now. Those taxpayers who kept fighting for this notice will now be eligible for this Amnesty scheme provided they satisfy the other conditions mentioned above."
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This story originally appeared on: India Times - Author:Faqs of Insurances