prpri Probable Consequences of Non-Compliance with 20% Input Tax Credit Restriction Probable Consequences of Non-Compliance with 20% Input Tax Credit Restriction


Amendment to Rule 36(4) Of CGST Rules 2017

Vide Notification No. 49/2019 – Central Tax 09-10-2019 on 20% ITC Restriction

Guided by Circular No. 123/42/2019– GST

1) Ques :What is 20% Restriction on ITC as per Notification No 49/2019 ?

Ans :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 in their GSTR-1 , shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers.

2) Ques : Whether the Compliance will be system generated or Self Assessed ITC ?

Ans : Self Assessed , The compliance will not be system generated , the compliance of above has to be done by each registered person.

3) Ques : What will be effect on purchase made from Dealers submitting quarterly GSTR 1 ?

Ans : You will be able to avail credit on quarterly basis only when supplier submits GSTR 1. Hence Cash Crunch may occur due to non-reflection of ITC Due to quarterly filing of supplier.
Or the other thing is to advice the supplier to submit GSTR 1 monthly.

4) Ques : What are the consequences of Non Compliance of above ?

Ans : Scrutiny of returns submitted by Registered person by Proper Officer under Section 61 of CGST Act 2017 , if any non-compliance found following may be done by the proper officer.

  • Issue of Notice seeking explanation.
  • If no proper explanation or corrective measures are taken , the proper officer may
    1. Proceed Audit under Section 65 of CGST Act 2017
    2. Special Audit of Party under Section 66 of CGST Act 2017
    3. Inspection , search , seizure under Section 67 of CGST Act 2017
    4. Initiate Proceeding under Section 73 (Other Than Fraud ) or 74 ( Fraud ) Under CGST Act 2017

Hence it is advised that due care while submitted GST Returns and proper matching to be done on invoice level and proper availing of ITC as per Law.

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My fellow members , please rectify me in case of need. These views are only for education purpose , and doesn’t constitute an legal advice , readers are hereby intimated that they are not bound by the views above and consult your legal consultant before taking any decision.

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August 2021