Can GST ITC be claimed without invoice on year end provision made in Books of accounts


In this prevailing situations and circumstances of COVID -19 most of the businesses are trying to make annual closures for FY 2019-20 by booking expenses on provisional basis in order to prepare their financial statements within time. Now these provisions are the unseen liabilities which will be occurring in future with uncertainty of amount of time of its happening. The question arises that if a provisional expense is booked without the actual invoice can one be eligible to claim ITC on the same. Let us understand with the provisions in accordance to the Law.

Are you eligible to claim ITC on provisional booking of expenses without actual invoice?

To understand this we will have to see the conditions to claim Input Tax Credit ITC which are laid under Section 16 (1) and Section16 (2) of the CGST Act,

Relevant Sections

Section 16(1) States,

Every registered taxable person shall, subject to such conditions and restrictions as may be prescribed and within the time and manner specified in section 44, be entitled to take credit of input tax charged on any supply of goods and services to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

Section 16 (2) clearly states the Entitlement or Requirements to avail Input Tax Credit,

Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods or services or both.

Explanation- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services:

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.

(c) The tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

(d) Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

From the above provision it clearly states that to claim ITC the person has to be in possession of a tax invoice and that he has received the goods or services or both. Therefore, ITC cannot be claimed on expenses booked on provisional basis.

Cautions to be noted

  1. Since the conditions for claiming of ITC clearly states that the person is to be in possession of invoices it means that business should not claim ITC on provisional expenses books unless it is in accordance with the provisions of GST Law
  2. If Taxpayer if only not certain about the recipient the claim of ITC on provisional basis also becomes ineligible
  3. It is to be noted that tax officers will make note of ITC claim during this period on account of provisions for scrutiny purpose you are advised to make your claims by taking all this factors into consideration.

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