At the time of introduction of GST i.e. 01.07.2017, it was proposed that pursuant to Section 37 (Furnishing details of outward supplies) read with old Rule 59 (Form and manner of furnishing details of outward supplies) the supplier of the goods or services will furnish the details of invoice or debit note of such supply in its return in FORM GSTR-1 which will be reflected in PART A of FORM GSTR-2A [read old Rule 59(3)] of the recipient of the goods or services of such supply wherein the recipient can modify the details furnished by the supplier by accepting or rejecting the same and the recipient will further file its return of inward supplies in FORM GSTR-2 in pursuance of provisions of Section 38 (Furnishing details of inward supplies) read with old Rule 60 (Form and manner of furnishing details of inward supplies). Consequently, the same will be reflected in FORM GSTR-1A [read old Rule 59(4)] of the supplier of the goods or services of such supply made to the recipient.
Lastly, as per Section 39 (Furnishing of return) the supplier and the recipient of the goods or services will file its return in FORM GSTR-3. However, the Government was unable to implement the proposed process in its entirety and matching and reversal mechanism in the GST portal [in Section 42 and 43] by the department could not be implemented, therefore, FORM GSTR-2, FORM GSTR-1A and FORM GSTR-3 could not be come into picture. A mid gap arrangement of filing of return in FORM GSTR-3B [read old Rule 61(5)] was introduced in lieu of FORM GSTR-3 which were later converted into a proper return in FORM GSTR-3B under Section 39 vide substitution of entire Rule 61 vide Notification No. 82/2020-Central Tax, dated 10.11.2020, w.e.f. 01.01.2021.
It is stated that during the 39th GST Council Meeting dated 14th March, 2020, the implementation of GST return system had been postponed to 1st October, 2020 and the system prevailing at that time (GSTR-1, GSTR-2A and GSTR-3B) was continued until September, 2020.
It is also pertinent to mention that as the Government was unable to implement the proposed process in its entirety and matching and reversal mechanism in the GST portal, therefore, they introduced first time Rule 36(4) to put on the limit of provisional input tax credit (ITC) that can be claimed up to a maximum cap of 20% of matched ITC, w.e.f. 09.10.2019 vide Notification No. 49/2019-Central Tax dated 09.10.2019. After the amendment in Rule 36 of the CGST Rules, 2017 w.e.f. 09.10.2019, for claiming ITC, the invoices need to be uploaded by suppliers in their FORM GSTR-1 and the same is to be communicated to the registered person (recipient) in PART A of FORM GSTR 2A. In case invoices are not uploaded, ITC with respect to such missing invoices will be restricted to 5% (w.e.f. 01.01.2021 till 31.12.2021) of available ITC in PART A of FORM GSTR 2A. (20% – if case before January 2020 and 10% -in case before December 2020) eligible from invoices which are uploaded by suppliers in their FORM GSTR-1 and hence are part of GSTR 2A in PART A. That was the first time (w.e.f, 09.10.2019) when the role of PART A of FORM GSTR 2A became very crucial to match the ITC.
Rule 36(4), specifies that the ITC claimed by a person for invoices not uploaded by Vendors cannot exceed by more than 5%/10%/20%, as the case may be, the ITC for invoices uploaded by Vendors in their FORM GSTR-1. As mentioned above, the Government was unable to implement the proposed process in its entirety and matching and reversal mechanism in the GST portal, therefore, pursuant to this, the 39th GST Council Meeting, it had been recommended to implement linking of GSTR-1 & GSTR-2A with GSTR-3B. A new Auto-generated, ITC statement has been introduced in the GST portal – The GSTR -2B which is available to all regular taxpayers from tax period July 2020 which is made available on trial basis, in the month of August 2020. GSTR-2B contains information relating to ITC available to a Taxpayer for a particular month. GSTR 2B is to enable the tax payer to comply with the Rule 36(4).
Later on, in the series of effort for matching concept, the Government, vide Notification No. 82/2020– Central Tax, dated 10.11.2020, has introduced the CGST (THIRTEENTH AMENDMENT) RULES, 2020, making amendments in Rule 61 and Form GSTR-1; Substitution of Rules 59, 60 and 61; Insertion of Rule 61A & FORM GSTR – 2B, and thereby introducing GSTR 2B w.e.f. 1.1.2021.
Accordingly, to give the statutory backing for claiming ITC as per FORM GSTR-2B, Finance Act, 2021 has inserted a new clause (aa) to sub-section (2) of section 16 of CGST Act, 2017)
“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;”.
Further, With the aforesaid amendment by Finance Act, 2021, Rule 36(4) of the CGST Rules, 2017 loses its purpose while the new clause (aa) under Section 16(2) of the CGST Act, 2017 comes into force. Now there is no relevance of restriction on availment of ITC under Rule 36(4) of the CGST Act, 2017.
The GST Council suggested an amendment to Rule 36(4) during the 45th meeting in September 2021. The amendment was notified on 29th December 2021 through the Central Tax Notification No. 40/2021 to add the same condition that clause (aa) of Section 16(2) stated.
Therefore, the Government, vide Notification No. 39/2021–Central Tax dated 21.12.2021 notified the below mentioned amendments of the Finance Act, 2021 w.e.f. January 01, 2022 and accordingly, Rule 36(4) of the CGST Rules, 2017 was fully substituted by further amended vide Notification No. 40/2021-Central Tax, dated 29.12.2021 w.e.f. 01.01.2022. The rule after amendment read as below:
“(4) Input tax credit shall be available by a registered person in respect of invoices or debit notes the details of which are required to be furnished under sub-section (1) of section 37 unless-
From 1st January, 2022 onwards, registered person must claim ITC that only appears in FORM GSTR-2B. The recently added condition allows you to avail ITC if your vendor declares that invoice or debit note in their corresponding GSTR-1 or Invoice Furnishing Facility (IFF). It must finally be found in your returns auto-generated under Section 38, such as FORM GSTR-2B. That is the first time when FORM GSTR 2B became very crucial to match the ITC.
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