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GST Notification-49/2019: Additional Cash Flow for the GST Payment

CA Pradeep Kumar Rajput 
Updated on 14 October 2019

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The government has come up with the new notification No. 49/2019 - Central Tax dated 09-10-2019. Through the said notification the government has made the GST input tax credit calculation even more complicated

So that is it all about?

GST Notification-49/2019: Additional Cash Flow for the GST Payment

On 09-10-2019 the government has inserted sub-rule (4) in the existing rule 36, which read as:

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 section 37, 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 under sub-section (1) of section 37."

So what's the problem?

 

Till now we used to calculate the input tax credit as the sum of total taxes paid on the purchase of the goods and services after excluding the blocked credit. In spite of the fact the said invoices have been uploaded by the supplier or not.

Now through the said notification, the government has put a maximum cap of 20% on the credit in respect of the invoices which are not uploaded by the suppliers.

Let's understand the same through the Example:

Example-1 

  • Total credit on the purchase of the goods and services Rs. 100/-
  • Suppliers have uploaded the invoices in respect of credit of Rs. 80/-
  • Suppliers have not uploaded the invoices in respect of credit of Rs. 20/-

Till now: In the above example till now we used to book the credit of Rs. 100/-.

After this amendment: After the said notification the maximum admissible credit will be Rs. 96/- (Rs. 80/- + (20% of Rs. 80/-) 

Example-2

  • Total credit on the purchase of the goods and services Rs. 100/-
  • Suppliers have uploaded the invoices in respect of credit of Rs. 20/-
  • Suppliers have not uploaded the invoices in respect of credit of Rs. 80/-

Till now: In the above example till now we used to book the credit of Rs. 100/-.

After this amendment: After the said notification the maximum admissible credit will be Rs. 24/- (Rs. 20/- + (20% of Rs. 20/-)

 

Why should I be worried?

There is ample reason to be worried because of the following reasons:

  • Our cash outflow toward GST payment is going to increase.
  • Calculation of admissible credit going to be more complicated.
  • Due to quarterly return filing, the small businesses are going to suffer most.
  • My credit calculation going to change as per the suppliers return filing hobbits.

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CA Pradeep Kumar Rajput 

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