CBIC Clarifies on Debit Notes, Physical Invoice and Refund of Accumulated ITC

The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 160/16/2021-GST to clarify the following:

• Date of debit notes to be considered while claiming Input Tax credit (ITC).
• Carrying physical invoice when e-invoice raised.
• Prohibition on refund of accumulated ITC in case of NIL rate of export duty.

Date of debit note for claiming ITC

Section 16 (4) amended with effect from 01.01.2021 to delink the invoice and debit note to claim the Input Tax Credit (ITC). In this regard, few taxpayers raised concern that which of the following dates are relevant to determine the ‘financial year’ while claiming ITC: 

1. Date of issuance of the debit note
2. Date of issuance of the original invoice

CBIC clarified that Section 16(4) of the CGST Act was amended with effect from 01.01.2021 to delink the debit note from the date of the original invoice to avail ITC. Hence, while claiming ITC on debit notes issued before or after 01.01.2021, the debit note date shall be considered but not the date of the original invoice.

Taxpayers also raised the concern of whether they can claim ITC on or after 01.01.2021 for debit notes issued before 01.01.2021?. The CBIC clarified that the amended provision should be applicable from 01.01.2021. Hence, the date of the debit note shall be considered for ITC availed on or after 01.01.2021. However, the date of the original invoice has to be considered for the ITC availed before 01.01.2021.

Carrying physical invoice when e-invoice is issued

Few taxpayers raised concerns about carrying a physical copy of an invoice when the e-invoice was issued for the supplies under CGST Rule 48 (4).

The CBIC clarified that there is no need to carry the physical copy of the tax invoice when an e-invoice was generated as per CGST Rule 48(4). It would be sufficient to produce a valid Quick Response (QR) code embedded with Invoice Reference Number (IRN) for verification by the officer.

Prohibition on refund of accumulated ITC

The first proviso to Section 54(3) of the CGST Act prohibits refund of unutilised ITC in case of exports of goods. Taxpayers raised their concerns about whether the same applies to the export of goods with a NIL export duty rate.

The CBIC clarified that only those goods on which export duty has to be paid at the time of export are covered under the restriction imposed under Section 54(3) from availing of refund of accumulated ITC. Hence, taxpayers can claim a refund of unutilised ITC when exported goods that are not subject to any export duty and:

• Which are mentioned as NIL rate in the Second Schedule of the Customs Tariff Act, 1975.
• Which are fully exempted from payment of export duty through customs notification.
• Which are not covered under the Second Schedule of the Customs Tariff Act, 1975.

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