Since GST has been Implemented Every Day a New hurdle is taking place in GST compliances Government is trying to do various experiment. As from last three months the government Revenue from GST was constantly Decreasing the government changed the Rules & Conditions for claiming the Input Tax Credit (ITC) in GSTR-3B CBIC has inserted the new Sub-rule (4) to Rule 36 with effect from 09.10.2019 Extract of sub-rule (4) of 36 areas “Input tax credit 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 sub-section (1) of section 37, shall not exceed 20 percent which is now it is reduced to 10% as decided in 38th council meeting held on 18.12.2019 of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.”

Summary of the new sub-rule / in common Language* Our claimed ITC IN GSTR-3B should not exceed by 10 % of ITC reflecting in GSTR 2A for the month, subject to section rule 36  To clarify the provision and its applicability, the Government has issued Circular No.123/42/2019 dated 11th November 2019 (This circular is for 20% not for 10%)  and various calculation with Certain example are given in circular. The important clarifications are Self-Assessment Basis, 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 taxpayers.

The restriction of 36(4) will be applicable only on the invoices/debit notes on which credit is availed after 09.10.2019 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. 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 10 % of the eligible credit available. The restriction of 10% applies with respect to 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 subsection (1) of section 37as on the due date of filing of the returns in FORM GSTR 1 of the suppliers for the said tax period.

Some interesting Facts Before this sub-rule was introduced on 9th Oct, GSTR-2A was just a reflective return for the betterment of taxpayers to track their vendors as was said in one of the press release of CBIC, suddenly on 9th Oct 2019, the government brought new sub-rule & in which GSTR-2A are going to play a very big role. Circular states that the eligible ITC as reflected in GSTR – 2A on the due date for filing GSTR – 1 needs to be considered. Hence such a date would be the 11th day of a given month. BUT our GSTIN will take around Two days to reflective respective GSTR-2A. No clarity on what will be the position when GSTR-1 filed after the due date.

CBIC Clarification is total silent on Quarterly return filers. In the case of Quarterly Taxpayer, they could not upload monthly invoices too, due to our GSTIN portal so what to do? This rule will create a requirement of working capital and unnecessary of blockage of funds, yet you have to make the payment by cash, later on, the same ITC will unutilized till next outward liability but there may be cases where cash payment increasing ITC cumulatively. This new rule 36(4) is restricting the ITC which is not showing in GSTR-2A.

It is very clear that due to this circular a new type of burden will be increased for taxpayers as well as professionals also as both needs to do various working every month and need to reconcile every 3 month. The logic behind this new sub-rule 36(4) can’t understand by anyone. I thought it may a step to prevent fake billing or ITC. If this will be the reason, it will be very unfortunate for honest taxpayers. In my opinion, it will impact very badly on small business who are quarterly filers will be drastically reduced because All one Would do their business with monthly filers only. Compliance cost also increase for taxpayers.

The Below transaction which will not affect this Rule 36(4)

Full ITC which are Out of subsection (1) of section 37,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 availing of ITC are met in respect of the same Effective from 9th OCT 2019.

The 38th council meeting decided to waive the Late fees for GSTR-1 from July 2017 to till date if filled before 10th January 2020 as it is not relevant as there was no Late fee ever Generated by GST Portal.

The Council did made the announcement on which professional were expecting which is extension for GSTR-9C as utility for which constantly delayed since announcement on 24.11.2019 it was to be updated on 10th of December which was later on delayed to 17th December which now to be updated on 21st of December.

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January 2021