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GST Policy Wing Clarifies ITC Eligibility Under S. 16(4) of the CGST Act for RCM Supplies

The Goods and Services Tax Policy Wing of the Central Board of Indirect Taxes and Customs (‘Board’) issued a clarification[i] regarding the time limit under s. 16(4) of the Central Goods and Services Tax Act, 2017 (‘CGST’) for availing of input tax credit (‘ITC’) under the reverse charge mechanism[ii] (‘RCM’).

This clarification addresses the confusion arising from a plain reading of s. 16(4) of the CGST Act states that the ITC can be availed by September/ November of the following year of the year in which the supply was received. However, according to s. 31(3)(f) of the CGST Act, the supplier must issue the invoice if the supplies are made under RCM. Therefore, for the purposes of s. 16(4) of the CGST Act, the relevant year is the one in which the invoice is issued.

Analysis of Legislation by the Board

  • The Board examined the provisions of s.16(2)(a) of the CGST Act and r. 36(1)(b) of the CGST Rules, 2017, which states that the registered person shall only be entitled to the credit of ITC if he is in possession of the tax invoice or debit note. The ITC can be claimed on the basis of the invoice issued under s. 31(3)(f) of the CGST Act.

  • ·The Board further examined the provision of s. 31(3)(f) of the CGST Act mandates that the recipient must issue the invoice if the supplier is unregistered. Additionally, S. 16(4) links the timing of the invoice or debit note issuance with the time limit for availing ITC.


The clarification issued by the Board under its powers as per S. 168(1) of the CGST Act is as follows:

  • ITC can be availed by September/ November of the following year in which the invoice has been issued. If the recipient issues the invoice after the time of supply, they will be liable to pay interest on such delayed tax payment.

  • It has been further clarified that the delayed issuance of the invoice by the recipient of goods or services under RCM may attract penal action under the provisions of s. 122 of the CGST Act.

Our Analysis

Through the aforementioned circular, the Board has clarified doubts arising from the interpretation of s.16(4) and s. 31(3)(f) of the CGST Act. This clarification can prevent potential litigation that may arise from confusion regarding these sections. It has also been clarified that failure by the recipient to issue the invoice, either to avoid tax or delay in issuing it, may attract penal provisions under s. 122 of the CGST Act.

S.122(3)(e) of the CGST Act states that if any person fails to issue an invoice in accordance with the provisions of this Act or fails to account for an invoice in their books of account, they shall be liable for a penalty that may extend to Rs. 25,000.

End Note

[i] Circular No. 211/5/2024-GST dated 26.06.2024.

[ii] S. 2(98) of the CGST Act defines reverse charge as the incident when the liability to pay the tax is on the recipient instead of the supplier.

Authored by Rosy Gupta, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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