Clarification regarding New Rule 36(4) of CGST
Rules, 2017, Restriction in Availment of Input Tax
Credit (ITC)
Circular No. 123/42/2019– GST, Dt. 11 Nov 2019
This
being a new provision, the restriction is not imposed through the common portal
and it is the responsibility of the taxpayer that credit is availed in terms of
the said rule and therefore, the availment of restricted credit in terms of
sub-rule (4) of rule 36 of CGST Rules shall be done on self-assessment basis by
the tax payers.
Various
issues relating to implementation of the said sub-rule and the clarification on
each of these points is as under: –
Issue No. 1
What are the invoices / debit
notes on which the restriction under rule 36(4) of the CGST Rules shall apply?
The restriction of availment of ITC is imposed only in respect of those
invoices / debit notes, details of which are required to be uploaded by the
suppliers under sub-section (1) of section 37 and which have not been uploaded.
Therefore, taxpayers may avail
full ITC in respect of IGST paid on import, documents issued under RCM, credit
received from ISD etc. which are outside the ambit of sub-section (1) of
section 37, provided that eligibility conditions for availment of ITC are met
in respect of the same.
The restriction of 36(4) will be
applicable only on the invoices / debit notes on which credit is availed after
09.10.2019.
Issue No. 2
Whether the said restriction is
to be calculated supplier wise or on consolidated basis?
The restriction imposed is not supplier wise. The credit available
under sub-rule (4) of rule 36 is linked to total eligible credit from all
suppliers against all supplies whose details have been uploaded by the
suppliers. Further, the calculation would be based on only those invoices which
are otherwise eligible for ITC.
Accordingly, those invoices on
which ITC is not available under any of the provision (say under sub-section
(5) of section 17) would not be considered for calculating 20 per cent. of the
eligible credit available.
Issue No. 3
FORM GSTR-2A being a dynamic
document, what would be the amount of input tax credit that is admissible to
the taxpayers for a particular tax period in respect of invoices / debit notes
whose details have not been uploaded by the suppliers?
The amount of input tax
credit in respect of the invoices / debit notes whose details have not been
uploaded by the suppliers shall not exceed 20% of the eligible input tax credit
available to the recipient in respect of invoices or debit notes the details of
which have been uploaded by the suppliers under sub- section (1) of section 37 as on the due date of filing of the returns
in FORM GSTR-1 of the suppliers for the said tax period.
The taxpayer may have to
ascertain the same from his auto populated FORM
GSTR 2A as available on the due date of filing of FORM GSTR-1 under sub-section
(1) of section 37.
Issue No. 4
How much ITC a registered tax
payer can avail in his FORM GSTR-3B in a month in case the details of some of
the invoices have not been uploaded by the suppliers under subsection (1) of
section 37.
Sub-rule (4) of rule 36 prescribes that the ITC to be availed by a
registered person in respect of invoices or debit notes, the details of which have not been uploaded by the
suppliers under subsection (1) of section 37, shall not exceed 20 per cent.
Of the eligible credit available in respect of invoices or debit notes the
details of which have been uploaded by the suppliers under subsection (1) of
section 37.
The eligible ITC that can be availed is explained by way of illustrations,
in a tabulated form, below.
In the illustrations, say a taxpayer “R” receives 100 invoices (for inward
supply of goods or services) involving ITC of Rs. 10 lakhs, from various
suppliers during the month of Oct, 2019 and has to claim ITC in his FORM
GSTR-3B of October, to be filed by 20th Nov, 2019.
Case
|
Details of
suppliers’ invoices for which recipient is eligible to take ITC
|
20% of eligible
credit where invoices are uploaded
|
Eligible ITC to be
taken in GSTR-3B to be filed by 20th Nov.
|
I
|
Suppliers have
furnished in FORM GSTR-1 80 invoices involving ITC of Rs. 6 lakhs as on the
due date
|
Rs.1,20,000/-
|
Rs. 6,00,000 (i.e.
amount of eligible ITC available, as per details uploaded by the suppliers) +
Rs.1,20,000 (i.e. 20% of amount of eligible ITC available, as per details
uploaded by the suppliers) = Rs. 7,20,000/-
|
II
|
Suppliers have
furnished in FORM GSTR-1 80 invoices involving ITC of Rs. 7 lakhs as on the
due date
|
Rs.1,40,000/-
|
Rs 7,00,000 + Rs.
1,40,000 = Rs. 8,40,000/-
|
III
|
Suppliers have
furnished in FORM GSTR-1 75 invoices having ITC of Rs. 8.5 lakhs as on the
due date
|
Rs. 1,70,000/-
|
Rs. 8,50,000/- +
Rs.1,50,000/-* = Rs. 10,00,000
* The additional amount of ITC availed shall
be limited to ensure that the total ITC availed does not exceed the total
eligible ITC.
|
Issue No. 5
When can balance ITC be claimed
in case availment of ITC is restricted as per the provisions of rule 36(4)?
The
balance ITC may be claimed by the taxpayer in any of the succeeding months
provided details of requisite invoices are uploaded by the suppliers. He can
claim proportionate ITC as and when details of some invoices are uploaded by
the suppliers provided that credit on invoices, the details of which are not
uploaded (under sub-section (1) of section 37) remains under 20 per cent of the
eligible input tax credit, the details of which are uploaded by the suppliers.
Full ITC
of balance amount may be availed, in present illustration by “R”, in case total
ITC pertaining to invoices the details of which have been uploaded reaches Rs.
8.3 lakhs (Rs 10 lakhs /1.20). In other words, taxpayer may avail full ITC in
respect of a tax period, as and when the invoices are uploaded by the suppliers
to the extent Eligible ITC/ 1.2. The same is explained for Case No. 1 and 2 of
the illustrations provided at Sl. No. 4 above as under:
Case-I
|
“R” may avail
balance ITC of Rs. 2.8 lakhs in case suppliers upload details of some of the
invoices for the tax period involving ITC of Rs. 2.3 lakhs out of invoices
involving ITC of Rs. 4 lakhs details of which had not been uploaded by the suppliers.
[Rs. 6 lakhs + Rs. 2.3 lakhs = Rs. 8.3 lakhs]
|
Case-II
|
“R” may avail
balance ITC of Rs. 1.6 lakhs in case suppliers upload details of some of the
invoices involving ITC of Rs. 1.3 lakhs out of outstanding invoices involving
Rs. 3 lakhs. [Rs. 7 lakhs + Rs. 1.3 lakhs = Rs. 8.3 lakhs]
|
Issues not clarified
This circular has failed to address the situation
where suppliers have opted for quarterly filing of GSTR-1 while the recipient
files monthly GSTR-1. This will create hardship for small taxpayers
as recipients would try to get supplies from the dealers (big dealers) who opt
for monthly filing of GSTR-1.
Impact of 20% Rule
Restriction imposed in Rule 36(4) will
certainly impact working capital of taxpayers as they have to pay more taxes
when suppliers file belated returns in Form GSTR-1. Moreover, the taxpayer
would not be able to claim refund of excess tax paid by them due to default of
the suppliers. Also, this reconciliation exercise of ITC is going to consume
lot of man hours every month.
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