Time Limit for Availing ITC on Differential IGST Begins from Date of Re-assessment and not Initial Date of Bill of Entry: AAR [Read Order]

The Tamil Nadu Authority for Advance Ruling (AAR) analyzed the applicability of the time limit under Section 16(4) of the Central Goods and Services Tax (CGST) Act, 2017, on the input tax credit (ITC) for differential IGST paid through reassessed bills of entry. The Authority held that the time limit for availing ITC on the differential Integrated Goods and Services Tax (IGST) paid would begin from the date of reassessment of bill of entry

The applicant, Becton Dickinson India Private Limited, is a private limited company engaged in the manufacturing and trading of medical equipment and devices. They also import and trade the same.

These imports were made on payment of customs duties at the time of filing the Bill of Entry for home consumption. The company operates under a limited risk distributorship agreement (LRD agreement), with an annual true-up pricing adjustment performed after the financial year end and based on arm’s length margins reviewed by the Special Valuation Branch (SVB) of Customs.

When the actual profit margin exceeded the prescribed arm’s length, the applicant paid differential customs duties, including IGST, to align with the SVB order. This payment of differential duties became necessary after each year’s review and resulted in either reassessment of the original bill of entry payment through TR-6 challans.

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The Chennai Sea Customs authorities allowed payment of differential duties through reassessed bills of entry. The key question was when the limitation period should begin for availing ITC on such differential IGST paid.

The AAR held that the time limit for availing ITC would ideally begin from the date of re-assessment of the bill of entry and as the payment of differential duties of customs, including IGST necessitated only when an upward price revision takes place at a later date.

Further, with the application of Section 16(4), the AAR clarified that the availment of ITC based on a bill of entry, whether original or re-assessed, is governed by the time limit as prescribed under Section 16(4) of the CGST Act, 2017.

The Authority bench comprising Balakrishnan S (CGST Member) and B Suseel Kumar (SGST Member) thus ruled that the time limit for availing ITC on differential IGST paid due to re-assessment commences from the date of the re-assessment of the bill of entry, not from the initial date when the bill of entry was originally filed.

The applicant was represented by K Sivarajan.

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