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Availability of ITC if not appearing in GTSR-2A –Shree Ganesha  of Litigation: – ( Pertaining to FY 2017-18 , 2018-19 & some Part of FY 2019-20)

Many Registered Dealer under GST (either suo-moto or as per legal advice or due to prevalent practice) conservatively have not availed the ITC of the invoices not reflected in GSTR-2A on the belief that same is ineligible. On the Other hand still department is also under dilemma about allowbility of same because honestly they believe that Law is silent on same. But interestingly department has started to include this as Demand in Audit Para-covered by Audit u/s 65 of CGST Act. But they know very well that same is going to subject matter of Appeal in future on mass level hence not insisting  to pay because of this state of affairs. Thus since introduction of GST Law this is becoming subject matter of debate without no hope for immediate & concluding remark in near future.

Further insertion Rule 36(4) vide notification No 49/2019 dated 09.10.2019 has made it knotty & increased gravity of dilemma. Department has also sent  SMS in past stating that :- “27ABPF…….The ITC on domestic purchases in FY 201819 claimed in GSTR-3B exceeds by Rs…..when compared with credit available in GSTR-2A”.Legal validity of such SMS is also under question . The intention of the law is to pass credit to the Assessee only if invoice appear in GSTR 2A but the way the rule is being introduced, it will ( already started) lead to litigation. Needless to say same is started via Audit u/s 65. But what about those who do not get covered under Audit due to Turnover criterion. If department track them in future then beside litigation it will lead to superfluous interest & penalty too which will be hindrance on such Assessee. I personally think in such case of such small cases department should not charge interest & penalty and should ensure that counter party (Supplier) has paid tax payable duly by supplementary means like GSTR-3B or Annual Return .This will reduce compliance burden on part of such small Assessee which is intention of the law…………………

……………… Let’s come to our Original Subject:-

Nevertheless ITC claimed by Recipient though not appearing in GSTR- 2A same can be claimed , availed  & utilized  in view of following principle & beliefs: ( Provided dealer is in possession of valid Tax Invoice , received goods or services and paid amount including taxes to supplier before expiry of 180 days –Sec 16 )

Efforts has been made in this article to justify the allowability  of  ITC though same not appearing in GSTR 2A .Following provisions support said view :-  One can argument before department if any demand is raised for payment of difference of TC appearing in GSTR 2A & GSTR 3B by referring undermentioned opinions

A. Provision relating to matching & mismatching laid down in section 42 & 43 of CGST Act, 2017 has not made still effective.

B. Validity of Rule 36(4) of CGST Rules, 2017 & effectiveness of its governing section 43A.

C. Press Release dated 18.10.2018 (2A is facility to taxpayer & not affect ability to claim ITC).

D. Press Release dated 3rd July 2019 (Annual Return).

E. Section 41 is also not notified yet regarding condition of payment by supplier to claim ITC.

F. Circular No 59/33/2018 dated 04-09-2018 regarding admission of Refund claim.

G. Various Judicial views & pronouncement under erstwhile Indirect Tax Laws.

H. Furnishing of GSTR 1 by Supplier doesn’t prove that he has also paid taxes, as payment of taxes is pre condition to avail ITC – Section 41.

I. Practical difficulty in application of Rule 36(4)

Lest analyze in detail one by one:-

A. Matching Principal Provision:-Since the section 42 & 43 of CGST Act, 2017 are not yet implemented, the matching requirement is not looked-for .In other words section 42 & 43 refers to GSTR -2 & GSTR -3 which has not been implemented yet. Therefore In the absence of mechanism of matching /mismatching process it is not valid to disallow ITC which is not appearing in 2A though government has intention to track suppliers and recipients who are not regular in filing of GSTR-1. Hence ITC though not appearing in 2A can be availed. Further it is important to mention here ( in my view) applicability of section 42 & 43 is under threat as new Return filing process (proposed section 43A ) is under development which may replace mechanism laid down by section 42 & 43.

B. Rule 36(4) of CGST Rules, 2017 & Section 43A:- Section 43A was inserted by the CGST (Amendment) Act, 2018 which prescribed the procedure for furnishing the return and availing the input tax credit. Later on Rule 36(4) inserted vide notification No 49/2019 dated 09.10.2019 to restrict ITC taken by any Registered person to the amount reflected in his GSTR 2A. Relevant extracts of Rule 36(4) Section 43A(4) is as under:

Availability of ITC if not appearing in GTSR-2A –Shree Ganesha of Litigation

Rule 36(4) read as:- ITC to be availed in respect of invoices or debit notes , the details of which have not been uploaded by supplier under section 37(1) , shall not exceed 20 % ( then 10 % &  now 5 %) of eligible ITC available in respect of invoices or debit notes , the details of which have been uploaded by the supplier under  section 37 (1).

Section 43A:- Procedure for furnishing return and availing input tax credit.’-

Subsection (4) states that the procedure for availing input tax credit in respect of outward supplies not furnished under sub-section (3) shall be such as may be prescribed and such procedure may include the maximum amount of the input tax credit which can be so availed, not exceeding twenty (then 10 % & now 5 %) percent of the input tax credit available, on the basis of details furnished by the suppliers under the said sub-section.

However the validity of such restriction will be questioned on the basis following concerns:-

1. Section 43A which was introduced by the CGST (Amendment) Act, 2018,prescribed the procedure for furnishing the return and availing the ITC. Section 43A operationalizes the new GST Return procedures. Section 43A(3) of the Act states that the procedure for furnishing the details of outward supplies by the supplier on the common portal, for the purposes of availing input tax credit by the recipient of supply shall be as prescribed. Further, Section 43A(4) provides that the procedures for availing input tax credit in respect of outward supplies not furnished u/s 43A(3) shall be prescribed. Section 43A (4) also seeks to provide that the maximum amount of ITC that can be availed [in relation to supplies not furnished u/s 43A(3)] shall not exceed 20% ( 10 % & now 5 %) of the ITC available, based on the outward supplies actually reported by the suppliers ( as specified by Rule 36(4)).Hence, firstly, the procedure for furnishing the details of outward supplies shall be prescribed, thereafter such restriction can be imposed. The pertinent point is that the aforesaid restriction is a part of the new return mechanism, which is scheduled from April, 2020 onwards, but has not been given effect under the existing mechanism.

2. Secondly power to make rule 36 (4) not came from section 43A hence this rule is invalid due to non-operational nature of section 43A. Again rule 36(4) has been incorporated by invoking Section 164 instead of Section 43A. Section 164 which is an omnibus section, empowering the Government to make Rules for any matters under the GST Act. To become operational Rule 36(4) should have been prescribed under Section 43A only

3. Basic legal principal that “Rules and Circular cannot override Act” cannot be ruled out.

4. And why to made responsible genuine buyer for default of supplier – This has been also upheld by various judiciary (discussed in para- G of this article)             .

Hence Rule 36(4) of CGST Rules 2017 imposing restriction on the availment of the credit of input subject to uploading of the invoices by the supplier is without Legislative Competence”.

C. Press Release dated 18.10.2018:- It is clarified herein that the furnishing of outward details in FORM GSTR-1 by the corresponding supplier(s) and the facility to view the same in FORM GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions of section 16 of the Act. The fear that ITC can be availed only on the basis of reconciliation between FORM GSTR-2A and FORM GSTR-3B conducted before the due date for filing of return in FORM GSTR-3B for the month of September, 2018 is unfounded as the same exercise can be done thereafter also.

D. Press release regarding Clarification regarding Annual Returns and Reconciliation Statement dated 3rd Jul-2019):- On the same line of above Press Release dt..18.10-2018 this Press Release speaks that Table 8A of the annual returns is auto populated from FORM GSTR-2A as on 1st May, 2019. This information reflected in Table 8A is for Informative purpose only. And thus not affect ability of taxpayer to avail ITC.

E. Condition of Tax Actually paid to Government: As per sec 16, (2)(c) of the CGST Act, Input Tax credit in respect of supply is available to the recipient only if tax charged on such supply has been actually deposited with the Government by the supplier .But this is subject to section 41 or section 43A. And as stated in previous para these sections are not notified yet –(matching mismatching ). Hence it surely appearing that section (16(2) c is in-operational).

F. Circular No. 59/33/2018 dated 04-09-2018,read with circuler 37/11/2018 dt 15-3-2018:-There may be situation that GSTR -2A may not contain all the details of invoices of which ITC is claimed where claim for Refund has been filed hence to minimize such practical difficulty vide Circular No. 59/33/2018 government had allowed refund to the dealers on furnishing hard copies of purchase invoices, even if they are not appearing in GSTR 2A . Hence, imposition of such restriction vide rule 36(4) is in complete contradiction to this circular.

G. Judicial View:- In the below mentioned cases, the courts manifested that no liability can be fastened on the purchasing registered dealer on account of non-payment of tax by the selling registered dealer in the treasury unless it is fraudulent, or collusion or connivance with the registered selling dealer. It should not be made the responsibility of the purchasing dealer to ensure that the tax is deposited by the selling dealer to the extent transaction is bonafide..Though many of them does not directly from GST era but still hold well in current scenario.

Case Law Authority Pronouncement
Arise India Limited and others High Court of Delhi Section 9(2)(g) of Delhi VAT Act to the extent it disallows Input tax credit to the purchaser due to default of selling dealer in depositing tax, as violation  of Articles 14 and 19(1)(g) of the Constitution of India.
Eicher Motors Ltd, Dai Chi Karkariya’ Hon’ble Supreme Court In value-added taxation, Input Tax Credit is the vested right of the Recipient.
In Larsen & Toubro CEGAT, MUMBAI Assessee should not be penalized by denial of Input credit for the mistake of the recipient of goods.


H. Furnishing of GSTR 1 by Supplier doesn’t prove that he has also paid taxes, as payment of taxes is pre condition to avail ITC as provided by 16(2)(c) read with section 41-GSTR 2A is derived by GSTR-1. If we consider condition about payment of taxes which is governed by GSTR 3B then it certainly creates doubt about applicability of  Rule 36(4).Filing of mere GSTR 1 does not automatically evidences payment of taxes which is  one of precondition to avail ITC. Further Section 41, 42, 43 & 43A are still not in operation. If intention of Government is to  ensure that credit will  passed to the Assessee then why it has not taken shelter of GSTR 3B.

Hence it will be interesting in future to see how department continue to  respond to variation between ITC claimed in GSTR 3B and appearing in GSTR2A. This is so because principal sections governing matching & mismatching are neither made operational nor made effective till the date. Further by notifying Rule 36(4) government tried to make up loss caused by non applicability of sections like 41, 42 , 42 , 43A but said rule lacking Legal Competence as discussed in foregoing para.

    Last but not least I am of opinion that comparison of ITC as appearing in GSTR-2A should  be made with ITC as per Books instead of GSTR 3B. This is so because GST Act has allowed to claim ITC up to September of next FY for skipped ITC pertaining to previous FY and hence ITC claimed in 3B in particular FY may not show true ITC pertaining to that FY. There is no doubt that such comparison with books will reflect fair view to arrive at any decision or demand. Here it will be duty of member or consultant to guide client and raise concern before GST department.


Disclaimer: Every efforts has been made to cover issues that may arise up to Oct-2019 & thereafter to little extent. The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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  1. K.Sethuraman says:

    The stipulation made in Article 265 that no tax shall be levied or collected without the authority of law implies that the prior purpose of tax law would have to be the same as the prior purpose of ANY law-namely TO SECURE AND PROTECT JUSTICE. Tax revenues are merely the OUTCOME of honest compliance with, and fair administration of tax law and not its prior purpose. It would appear that the digital governance of avoiding cascading by enabling the availing of ADVANCE input GST credit as envisaged in the GST law neither helps compliance nor administration.

  2. JAYARAMAN says:

    marc2021 itcdeductedin gstr3b and submitted
    marcitc reflected in apirl2021gstr2b and claimed
    but now i see that itc was reflected in 8A OF GSTR9

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April 2024