1. Rule 36(4) was introduced to restrict the availment of credit on invoices and debit notes uploaded by the supplier in GSTR 1 up to 10% [20% for period 01.10.2019 – 31.12.2019] of the eligible credit available on invoices and debit notes details of which have been uploaded by the suppliers in GSTR 1. Now 10% has been amended to 5% w.e.f 01.01.2021 without any reasonable justification
Note: The restriction is applicable only on those invoices or debit notes which are to be uploaded by the supplier under section 37(1) of CGST Act i.e., in his GSTR-1 but which have not been uploaded by him. Therefore, one could avail full ITC of the GST paid on the following:
The restriction imposed is not supplier wise: Therefore, one would be required to consider the above restriction on a consolidated basis i.e., on the basis of total eligible ITC appearing in its GSTR-2A and total eligible ITC as per its books of accounts. It would not be required to do the comparison supplier wise or invoice wise
2. Further, the restriction placed in Rule 36(4) is ultra vires CGST Act, 2017, as it appears to have been inserted in Rules in accordance with Section 43A of CGST Act, 2017. Section 43A was inserted by CGST Amendment Act, 2018, which is however, not notified as of date. Where section is not yet notified, the above rule would be ultra vires the law.
3. Further one may need to appoint one executive exclusively for the purpose for doing the reconciliation of ITC between books of accounts & GSTR-2A/2B in GSTN Portal. His job would only be to follow up with vendors for continuous filing of GSTR-1 Returns. Instead of doing business one may need to be behind vendors for filing the GSTR-1 returns from their end.
4. As per Section 37 of the CGST Act,2017 a registered supplier can upload/ modify the invoices relating to a particular financial year till the due date of filing the return of September of the subsequent financial year or furnishing of annual return whichever is earlier.
5. Therefore, the suppliers are having ample time to file their GSTR-1s for the financial year 2019-20. We are constantly making our honest efforts, we are behind our vendors & demanding them for filing the GSTR-1.
Isn’t it’s so easy to avail seamless ITC now? One may think to expense the ITC itself, it has become more direct tax rather than indirect tax – Credit has lost its presence.
Please reach at firstname.lastname@example.org in case of clarifications