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’.
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Dear Sir,
Party dispatched material in Oct-2020 for Rs 10 Lac+ 2.8 Lac GST . material received to me in Nov-2020. but this appear in 2A of Oct-2020. But as i received material in Nov-2020 i will claim this in Nov-2020. But there is no credit for the same in 2A
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.
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??
sirji, quaterly calculation hai .aur 24% yearly.
400000*24%/4.
As per my knowledge yes interest prov will be attracted but under 50(1) at 18% and not 50(3) at 24%.
Very Informative
thanks, informative
Sir, how the section 16 of CGST Act with Rule 36 will effect on this?