GST Circular dated 15.10.2024 clarifies implementation of section 16(5) and 16(6)

On 15th October 2024, the Goods and Services Tax (GST) Council released an important circular that brings much-needed clarity to the implementation of Sections 16(5) and 16(6) of the GST Act. These newly inserted provisions allow ITC of full ITC of the invoices about FYs 2017-18, 2018-19, 2019-20, and 2020-21 if availed up to 30^th November 2021 and in cases where the registration was cancelled, but cancellation was revoked afterwards.

Let’s understand the circular!

Key Highlights of Circular No. 237/31/2024-GST Dated 15.10.2024

• Finance Act (No.2), 2024 introduced 2 new sub-sections to section 16 of the CGST Act, 2017; 16(5) and 16(6). These newly inserted provisions allow ITC of full ITC of the invoices about FYs 2017-18, 2018-19, 2019-20, and 2020-21 if availed up to 30^th November 2021 and in cases where the registration was cancelled, but cancellation was revoked afterwards.
• Further, section 150 of the Finance (No.2) Act, 2024 (reproduced below) provides that no refund of any tax paid or the input tax credit reversed shall be granted on account of the said retrospective insertion of sub-section (5) and sub-section (6) of section 16 of the CGST Act.
• Also, Notification No. 22/2024—Central Tax, dated 08.10.2024, provides a special procedure for rectifying GST orders related to the wrong availment of Input Tax Credit (ITC), specifically under sections 73, 74, 107, or 108, where ITC was wrongly denied under section 16(4) but is now eligible under sections 16(5) or 16(6).
• To clarify the above amendments, this circular is issued by CBIC. It clarifies the following actions to be taken by taxpayers/ authorities to implement the amendments:

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• The taxpayers can apply for rectification electronically, after login to www.gst.gov.in, using their credentials as follows:

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• While filing such application for rectification of order, the taxpayer shall upload along with the application for rectification of order, the information in the proforma in Annexure A of the said notification, containing inter-alia the details of the demand confirmed in the said order of the input tax credit wrongly availed on account of contravention of sub-section (4) of section 16 of the CGST Act, which is now eligible as per sub-section (5) and/or sub-section (6) of section 16 of the CGST Act.
• The said officer shall decide on the said application for rectification and issue the order, as far as possible, within three months from the date of such application.
• Besides, in case where any rectification is being made by the proper officer in the order for which the rectification application has been filed, he shall also upload a summary of the rectified order electronically in FORM DRC-08 in cases where rectification of an order issued under section 73 or section 74 of the CGST Act is being made, and in FORM GST APL-04, in cases where rectification of an order issued under section 107 or section 108 of the said Act is being made.

To read the full circular, click here.

‍Conclusion

‍The GST Circular dated 15th October 2024 has provided essential clarifications regarding the implementation of Sections 16(5) and 16(6) of the CGST Act, offering businesses a clearer understanding of their rights and responsibilities when claiming Input Tax Credit (ITC). These retrospective provisions address crucial issues like the eligibility of ITC for past fiscal years and the process for rectifying past errors related to ITC claims.