HERE I WANT YOU UNDERSTAND 36(4) AND ITS HIDDEN AGENDA. I Request everyone to read BELOW EXAMPLE. On 36(4). THE danger of 36(4)… Interest cost disguised in it… Do read and discuss with your colleagues. Share with your professional friends… read below example of XYZ LTD.

XYZ LTD HAVE FOLLOWING PURCHASES IN JANUARY, FEBRUARY, MARCH

MONTH CGST SGST TYPE? SHOWN IN GSTR 2A/2B ?????
1 from A LTD JAN 400000 400000 QUARTERLY NOT APPEARING IN SAID MONTH
2 from B LTD FEB 300000 300000 QUARTERLY NOT APPEARING IN SAID MONTH
3 from C LTD MAR 500000 500000 QUARTERLY ALL 3 INVOICES APPEAR IN 2A/2B in March

FOR FILLING GSTR 3B, XYZ LTD HAVE IGNORED PORTAL 2A/2B STATUS. THEY FILED 3B WITH ABOVE ITC FIGURE IN RESPECTIVE MONTH

QUESTION – IN LINE OF 36(4), HE HAS CLAIMED MORE CREDIT IN JAN AND FEB, IS XYZ LTD IS LIABLE FOR ANY INTEREST ? And YES…. but HOW??? There is no excess ITC taken… but still Interest cost will be there.

Author’s Comments –

Game of 36(4) is not only restricted to ITC restriction. but it is more than that. What Govt. intention with 36(4) is TO earn INTEREST… so it’s just not about restricting seamless ITC. If you check in most of your clients, at the end of 3 months, there will be SAME AMOUNT of ITC appearing what you claimed in 3B OF 3 MONTHS. WHAT DANGER LIES HERE. INTEREST PORTION that comes with 36(4) implication.. In the above example, ITC tallies at 3rd month.. claimed 1200000+1200000 ITC total in 3 month… and the same appearing 3rd month 2A.. SO, YOU MAY SAY THERE IS NO PROBLEM…ANSWER – THERE is PROBLEM…. “INTEREST… AS PER 50(3) “… 24% PA on amount claimed excess… in our example, For January, Rs. 16000+16000 and for Feb, it will be 6000+6000… Got shocked????… for a small client it may not be a huge amount… but if your figures are in lacs, You are gone… Even If your GSTR2A appears to be tallied after quarter end or year-end… You may refer below text from Bare act and rules.

SO, INTEREST CALCULATION CGST SGST
AMT PERIOD FOR UNDUE ITC TAKEN
FOR JAN 400000 + 400000 2 MONTH AT 24% SO INTEREST WILL BE 16000 16000
FOR FEB 300000+300000 1 MONTH AT 24% SO INTEREST WILL BE 6000 6000

HERE I WANT YOU UNDERSTAND 36(4) AND ITS HIDDEN AGENDA. I Request everyone to read BELOW EXAMPLE. On 36(4). THE danger of 36(4)… Interest cost disguised in it… Do read and discuss with your colleagues. Share with your professional friends… read below example of XYZ LTD.

THANKFULLY NO ITC REVERSAL. we HAVE TAKEN ONLY HAPPY SCENARIO. IF THERE WAS ANY INVOICES NOT APPEARING OUT OF 3, THEN THERE WOULD BE REVERSAL ALSO.

Text from law – 36(4) rule of CGST and Section 50(3) for your ready reference.

Rule 36(4) “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 Sections 37, shall not exceed [10 percent] 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 Sections 37”.

50(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding 24% per cent.,

Analysis- Meaning of undue – In context of GST law, anything done with respect to claiming of input tax credit (“ITC”) or/and while calculating output tax liability which is not acceptable or reasonable as per provision(s) of law would be termed as “undue”.

Meaning of excess –Any claim of ITC or/and any reduction in output tax liability which is in excess of the permitted limits as per the provision(s) of GST law would be termed as ‘Excess’.

******

Disclaimer: The contents of this article are for information purposes only and do 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.

Author Bio

More Under Goods and Services Tax

6 Comments

  1. CA I.J. Dhawan says:

    In this context pl. advise if a power generation company has shown ITC on various purchases/ work contracts in 3B but has not utilised/ availed it against its output liability. Will rule 36(4) is attracted.
    The power/ electricity being exempted supply is out of gst. Hence as per 3B it the is ineligible and have to be reversed. But the company’ inadvertently did reverse it.
    However it neither utilised nor claimed.
    Will the reversal now will be subject to interest.

  2. HARWINDER SINGH says:

    SIR, AAPKI CALCULATION SAMAJH NAI AAYI,, JANUARY KI CGST AND SGST =400000*24/100*2/12=16000 … LEKIN DIVIDED BY 12 KYN KIYA .. 400000 KI AMOUNT PURE SAAL KI THODI HAI JI??

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

November 2020
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
30