GSTN launches online rectification for pending ITC claims from 2017-2021

Once processed by the tax department, this rectification application will release the pending input tax credits from previous years and adjust the GST order to reflect a nil demand

Goods and services tax (GST)-registered taxpayers can now claim pending input tax credits (ITC) from previous financial years, including 2017-18, 2018-19, 2019-20, and 2020-21, by submitting an online rectification application.

 

According to GSTN, a functionality has been introduced on the portal, enabling taxpayers to file applications for rectifying orders issued under sections 73/74.

 

Background

 

Historically, the ability to claim ITC has been a complex aspect of GST compliance. Taxpayers often faced challenges when their claims were rejected due to errors or misunderstanding regarding the applicable laws. Particularly, Section 16(4) of the Central Goods and Services Tax (CGST) Act stipulated strict timelines for claiming ITC, which many taxpayers struggled to meet. In response to these challenges, the government introduced an Amnesty Scheme in Budget 2024, aimed at providing relief to these taxpayers by allowing them to rectify past claims.

 

Amit Bansal, Partner, Singhania & Co. explains why online rectification is introduced: 

 

Compliance simplification: The move aims to provide a streamlined process for taxpayers to claim pending ITC for past financial years without undergoing tedious manual procedures.

 

Rectification of past orders: Taxpayers who faced discrepancies, errors, or denial of input tax credits due to procedural or technical issues can now seek rectification of orders issued under Sections 73 and 74 of the GST Act.

 

Improved efficiency: The online filing system expedites case resolution, minimises bureaucratic delays, and reduces disputes by providing transparency in rectification requests.

 

Potential catches -

 

Limited eligibility: Taxpayers may only file rectification applications for specific types of discrepancies or issues allowed under Sections 73/74. Claims related to fraudulent ITC or severe non-compliance may still be excluded.

 

Strict timelines: Applications for rectification must be submitted within a prescribed period, failing which the claims may be rejected.

 

Documentation requirements: Extensive documentation may be required to support the claims, including evidence of earlier ITC rejections and compliance with GST regulations.

 

SR Patnaik, Partner (head-taxation), Cyril Amarchand Mangaldas explains how it will benefit taxpayers

 

The Amnesty scheme and the associated online rectification process provide a much-needed opportunity for eligible taxpayers to nullify demand notices and orders related to ITC mismatches and have the denied ITC credited back to their GST ledger, thereby easing cash flow constraints.

 

The limited timeframe to file applications—ending April 8, 2025—underscores the need for taxpayers to act promptly to leverage this relief measure.