Summary of GST Circular 160: Clarification with respect to certain GST related issues

The finance ministry tries to simplify the issues that companies and taxpayers are facing via notifications and circulars. In this article, we will cover the summary of GST Circular No. 160 that suggests clarification with respect to certain GST related issues.

1. Clarification on the Debit Note:

From 1st January 2021, the date of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act.
For example: If an original invoice was dated 15th January 2021, a corresponding debit note was issued by the supplier on 10th April 2021. Since the FY of this debit note is FY 2021-22, credit in respect of such debit note can be availed up to the date of filing of GSTR-3B for September 2022.
The facility to avail ITC on debit notes for amended provision shall be applicable from 1st January 2021. Accordingly, for ITC claim on or after 1st January 2021, regarding debit notes issued either prior to or after 1st January, the eligibility for availing of ITC will be governed by the amended provision of section 16(4), whereas any ITC availed before 1st January 2021, in respect of debit notes, will be governed under the provisions of section 16(4), as it existed before the said amendment on 1st January 2021.
This means that the supplier can now negotiate with their customers and raise debit notes for past original invoices if there was an error in taxable value or tax charged. Also, the recipient will be eligible to take credit of such debit notes subject to fulfillment of other ITC conditions.

2. Clarification regarding carrying Physical Copy of Invoice:

There was confusion among taxpayers concerning the compulsion of carrying a physical copy of the invoice during movement of goods in cases where suppliers have issued invoices in the manner prescribed under rule 48 (4) of the CGST Rules, 2017 (i.e. in cases of e-invoice).
It is now clarified that there is no need to carry the physical copy of tax invoice in cases where the invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules and there is a QR Code with embedded IRN electronically, for verification purposes by the proper officer.

3. Clarification regarding prohibiting refund of unutilized ITC, in case of Nil rated exports of goods:

There was confusion among taxpayers whether the first provision to section 54(3) of CGST / SGST Act, prohibiting refund of unutilized ITC, is applicable in case of exports of goods which are having NIL rate of export duty.
It is now clarified that only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) from availing of refund of accumulated ITC.
Goods, which are not subject to any export duty and either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification OR which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3) of the CGST Act for the purpose of availing of refund of accumulated ITC. To simplify the above clarification, the goods with NIL rate of export duty are NOT restricted under the first proviso to Section 54(3) of the CGST Act, 2017.

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