This circular provides clarity on the applicability of the time limit under Section 16(4) of the CGST Act, 2017 for availing Input Tax Credit (ITC) by recipients who pay tax under the Reverse Charge Mechanism (RCM) on supplies received from unregistered persons.

It explains that where the recipient is liable to pay tax under RCM for supplies received from an unregistered supplier and issues the invoice under Section 31(3)(f) of the CGST Act, the relevant financial year for calculating the ITC time limit will be the year in which the invoice is issued—not the year in which the supply was received. Accordingly, ITC can be availed up to the 30th of November of the financial year following the year of invoice issuance, provided all other conditions of Sections 16 and 17 are met.

The circular further clarifies that if the recipient delays issuing the invoice and paying tax under RCM, they must pay interest on the delayed tax and may also face penal action under Section 122 of the CGST Act. The clarification aims to ensure uniform interpretation and avoid disputes regarding ITC availment timelines across field formations.