I have noted down Bare Act provision, rule & Circular. It will Take you to the journey of ITC in GST from 36(4),2A, 2B, and then 16(2)(aa)
Rule 36(4) is the longest confusing debatable topic which I had discussed with others.
ANALYSIS OF 36(4) AND JOURNEY OF ITC FROM BOOKS TO 2B
RULE 36(4) (introduced on 09-10-2019 by way of Notification)
ITC to be availed by RP in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under subsection 37(1), shall not exceed 5% 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 37(1)
So here, Rule says that GSTR 1 uploaded u/s 37(1) will be considered for eligible credit & max 5% extra Credit can be availed. SO It leads to many questions…
Q1. Whether I can claim ITC of invoice in the same month when I made purchase Even though it has been uploaded after 11th 13th?? ..
Q2. Why so much pressure of filling till 11th / 13th? As Rule doesn’t clearly say that Counter party must upload before 11th/13th. LET’S read SECTION 37(1) and find out
Every registered person, shall furnish, electronically, the details of outward supplies during a tax period on or before the tenth day of the month succeeding the said tax period and such details shall be communicated to the recipient of the said supplies.
first proviso to Section 37(1)
the registered person shall not be allowed to furnish the details of outward supplies during the period from the eleventh day to the fifteenth day of the month succeeding the tax period (This was never been put to implementation because it was related to GSTR 1 , 2, 1A, 2A, 3 system)
Second proviso to section 37(1)
Commissioner in Board can extend the time limit for furnishing such details by issuing a notification
SO, We all know that Due date of GSTR 1 is not what is still written in section 37 but it is as per prescribed by way of notification that is what said in second provisio to SECTION 37(1) .So notifications issued by Board time to time for GSTR 1due dates are to be considered as due date of GSTR 1. These notifications prescribed Time limit. What about GSTR 1 filed after this Time limit? Portal allows to file GSTR 1/IFF after 11th /13th then again question is unanswered. Can we take GSTR 2A of 20th to consider the eligible credit as per Rule 36(4) because 36(4) never says that GSTR 1/IFF must be uploaded within due date? It seems unclear on this. Let’s read extract on Circular 123/42/2019 For clarification on this.
so, this takes us to Circular 123/42/2019 CGST WHERE THIS WAS MENTIONED
Circular No. 123/42/2019– CGST
Q.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?
Ans. 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 5% 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 subsection (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.
SO, GSTR 2A invoice uploaded upto due date are nothing but GSTR 2B and SO they introduced GSTR 2B & We have to consider only GSTR 2B (or max 5% more). BUT QUESTIONS ARE STILL THERE.
Q1 WHETHER CIRCULAR ARE BINDING WHICH PRESCRIBED THIS?
Q2 HOW CAN RECIPIENT IS AT LOSS OF ITC WHERE COUNTER PARTY HAS NOT UPLOADED WITHIN DUE DATE?
Q3 HOW CAN THEY PUT IMPOSSIBLE CONDITION WHICH NOT POSSIBLE TO COMPLY?
Q4 HOW TO COMPLY WITH LAW WHEN COUNTER PARTY’S ACT IS BEYOND CONTROL OF RECIPIENT?
Q5 WHY NO SIGNIFICANCE OF PHYSICAL INVOICE RECEIVED BY RECIPIENT TO ALLOW FIRST TO AVAIL ITC?
Q6 When I have paid the taxes to the supplier, received the goods, filed my returns within time still I won’t be allowed to claim ITC because my supplier has not filed his GSTR 1?
Q7 Is it not against my constitutional right to have a claim on my assets?
Moreover, BIGGEST QUE is
If Rule 36(4) not followed and If there only Time differences then Interest will be levied or not? (For e.g. You claim in Oct-20 GSTR 3B. Counter party Uploaded in DEC GSTR 1, So can dept. ask Interest for 2 months?? )
Section 16(2)(aa) – It is yet not notified when it will be effective
In addition to Rule 36(4) existing, in budget 2021, Govt. has added Section 16(2)(aa) in Budget 2021. “CLAIM ITC ONLY IF COUNTER PARTY HAS UPLOADED” (one should dissect this only when Notified)
Putting end to 36(4) now You can’t even claim 5% higher
So if you have claimed ITC which is not reflected in your GSTR 2A/2B, You must reverse with Interest in 3B
This Puts end to 36(4), now you can’t even claim 5% higher. ” ACT” itself amended which is over & above Rule
In more Simple Words, Claim ITC as equal to Appear in 2B … If excess claimed then reverse with Interest