GST Relief for Wrong Availment of ITC: Rectification Process and Key Amendments Under Notification No. 22/2024

In a major move to provide retrospective relief to taxpayers, the Goods and Services Tax (GST) Council has introduced crucial amendments to Section 16 of the CGST Act, 2017. These amendments, which were recommended during the 54th GST Council Meeting in September 2024, address issues related to the wrong availment of Input Tax Credit (ITC) and allow taxpayers to rectify past discrepancies.

On October 8, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 22/2024 to lay down the special procedure for rectifying orders related to the wrong availment of ITC. The provision is retrospective, applying from July 1, 2017, and aims to resolve issues where ITC was initially disallowed but is now permitted under the updated provisions.

Key Amendments to Section 16 of the CGST Act

The newly inserted sub-sections (5) and (6) in Section 16 offer a retrospective relief to taxpayers. These provisions allow the availment of ITC that was previously denied due to non-compliance with Section 16(4). Here’s a breakdown of what these sub-sections entail:

Sub-section (5):

• ITC Availment Without Tax Invoice: Allows the availment of input tax credit even if the recipient has not received the tax invoice, provided the conditions of Section 16(2) are met.

Sub-section (6):

• ITC Availment Without Payment to Supplier: Permits the availment of ITC even if the recipient has not paid the supplier within the stipulated period, as long as the tax has been deposited with the government.

These changes aim to rectify situations where businesses were previously penalized for non-compliance, even though they are now eligible for ITC under the revised rules.

Special Procedure for Rectification of ITC Orders

To implement these amendments, Notification No. 22/2024 outlines a special procedure for rectifying past orders where ITC was wrongly availed, but the conditions of sub-sections (5) or (6) now apply. Here’s a step-by-step guide to the rectification process:

 

 

1. Application Filing:

• Who: The taxpayer (affected person) must file an electronic application on the common portal.
• Deadline: The application must be filed within 6 months from the date of the notification, which means by April 8, 2025.
• Required Information: The application should include Annexure A, containing all relevant details for the rectification.

2. Processing by the Proper Officer:

• The officer who issued the original order will process the rectification application.
• The officer is expected to issue a rectified order within 3 months from the application date, wherever possible.

3. Forms for Rectified Orders:

• If the rectification relates to demands under Section 73 (non-payment/short-payment of tax or wrongly availed ITC), the order should be uploaded in FORM GST DRC-08.
• If it pertains to appeals under Section 107 or 108, the rectified order should be uploaded in FORM GST APL-04.

4. Scope of Rectification:

• The rectification will only apply to the wrong availment of ITC under Section 16(4), which is now allowed under sub-sections (5) or (6).

5. Principles of Natural Justice:

• If the rectified order adversely affects the taxpayer, the principles of natural justice must be followed, ensuring a fair hearing and decision.

Key Deadlines for Taxpayers and Authorities

Event	Deadline
Filing application for rectification	By April 8, 2025
Issuance of rectified order by officer	Within 3 months from the date of application

 

 

Why is This Amendment Important?

The implementation of sub-sections (5) and (6) of Section 16 provides significant relief to taxpayers who were previously denied ITC due to technical non-compliance with Section 16(4). These changes help rectify past discrepancies and ensure that taxpayers can now avail of ITC they rightfully qualify for under the updated provisions.

The rectification mechanism ensures that taxpayers can correct past orders where they may have been penalized for wrongly availed ITC, but which is now valid under the revised rules. This will bring relief to many taxpayers and promote a more taxpayer-friendly GST regime.

Conclusion

The amendments introduced by Notification No. 22/2024 and the special procedure for rectification offer a timely opportunity for taxpayers to correct past ITC issues and claim what they are rightfully entitled to. Taxpayers are urged to file their applications promptly and ensure compliance with the new rectification process to benefit from the relief provided under these changes.

For detailed guidance and assistance, businesses should consult their tax advisors and review the provisions of the CGST Act to ensure full compliance with the new rules.