The Government has come with a new notification restricting the quantum of availing the Input Tax Credit in respect of supplies for which supplier has not uploaded the invoices or debit notes on the GST Portal. Read this article for a brief understanding of such a restriction of ITC.
CBIC has released a new notification no. 49/2019 dated 9th October 2019 inserting a new sub-rule 4 in rule 36 under Central Goods and Services Tax (Sixth Amendment) Rules, 2019 by amending the Central Goods and Services Tax Rules, 2017.
Rule 36(4)
As per Rule 36(4) the registered person should not avail Input tax credit (ITC) in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, exceeding 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 under sub-section (1) of section 37.
Rule 36(4) in Brief
Prior to the amendment, the Input Tax Credit (ITC) has been calculated without any restrictions based on the taxes paid to the government in respect of the purchases of Goods or Services or both after excluding the blocked credit irrespective of the fact of whether the supplier has uploaded the details of Invoices or debit notes or not.
Now as per the notification, the government has put a restriction to claim only 20% of Input Tax Credit (ITC) of eligible credit available to the taxpayer in respect of the Input Tax Credit of the invoices or debit notes for which the details have not been uploaded.
Note: The Aforesaid restriction shall not be applicable to the cases where Input credit is availed in respect of the GST paid under Reverse Charge Mechanism.
Understanding Rule 36(4) through Examples
Example:
| Particulars | Amount |
| Input Tax Credit Available in the Books of Accounts in respect of the registered supplies (a) | 100 |
| Input Tax Credit Available in the portal in respect of such registered supplies (b) | 60 |
| Amount of Input Tax Credit that can be availed by the Taxpayer is {(b)+(b)*20%} i.e., {60+(60*20%)} | 72 |
| Note: The Balance of Input Tax Credit i.e., Rs.28/-(100-72) shall be availed only when the supplier has uploaded the invoices on the GSTN portal or as a portion of the 20% limit of subsequent months. | |
Impact and Deficiencies in Rule 36(4)
- The taxpayer has to follow their vendors on a regular basis to upload their invoices so as to take the entire Input Tax Credit without any restrictions.
- It has increased the compliance burden- as the taxpayer has to reconcile the Input Tax Credit with the GST portal on a regular basis.
- This may result in an increase in cash outflow towards the GST Payment.
- Lack of clarity on the computation period for which such a 20% limit has to be calculated.
- Lack of clarity on the date from which the Rule 36(4) has to have complied.
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