GST – Section 16 (2) (aa) Latest Update
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As per Section 16(2)(aa) of Budget 2021, GST input can only be claimed if the invoice is supplied by the party before April 1, 2021.
It will be effective from 01.01.2022
The Input Tax Credit (ITC)
The GST paid on the purchase of Goods & Services is known as Input Tax. The Input Tax Credit fundamentally means that taxes paid on inputs are deducted from taxes due on output. According to Section 16(1) of the CGST Act, every registered taxable person is entitled to take credit for input tax paid on any purchase of goods or services being used or aimed to be used in the course and scope of his business, subject to such conditions and limitations as may be recommended and within the timeframe mentioned in section 49, and the said amount shall be credited to such person’s electronic credit ledger.
Section 16(2)(aa) of the CGST Act of 2017 was introduced into the Finance Act of 2021 via Section 109. The following is an excerpt from proposed Section 16(2)(aa) of the CGST Act, 2017:
In case (aa) the supplier has provided the details of the invoice or debit note mentioned in clause (a) in the statement of outward supplies. Those details are conveyed to the recipient of such an invoice or debit note in the mode specified under section 37;
Section 16(2) (aa) states that ITC can only be claimed if the supplier has provided the necessary information in his GSTR-1.
In simple words, as per the new amendment (aa) to section 16(2) of the CGST Act, an input tax credit on a receipt or debit note can only be claimed if the details of the invoice or debit note were provided by the supplier in the statement of outward supplies. Those details should be conveyed to the invoice or debit note’s recipient.
The Finance Act of 2021 amended Section 16(2) of the CGST Act to include Clause (aa).
It is now clear that ITC claimed on receipts that the supplier did not upload to his GSTR-1, and that must be reversed. The tax/interest/penalty must also be paid under section 73(5) of the CGST Act 2017.
The vendor must now provide the specifics of such a receipt or debit note in GSTR-1, and the recipient will be entitled to the ITC. Although the communication provision was already included in section 37(1) of the Central Goods and Service Tax Act, it is now a requirement to get an ITC.
Such information will be conveyed to the supply receiver as shown in user services > Communication between taxpayers. The receiver must accept the same. A taxpayer can interact with the beneficiary if there is a disparity, such as payment issues or any other issue.
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