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Can Rule 36(4) Restrict Or Disallow The Input Tax Credit Claimed By Assessee?

The Central Board Of Indirect Taxes And Customs Vide Notification No 49/2019-Central Tax New Delhi, The 9th October,2019 Through Para 3 Inserted New Sub Rule(4) In Rule 36,After Sub Rule(3) Which Reads As Follows:

In The Said Rules, In Rule 36, After Sub-Rule (3), The Following Sub-Rule Shall Be Inserted, Namely:-

'(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.'

It Means That New Sub Rule 4 Of Rule 36 Is Inserted For The Invoices Which Have Not Been Uploaded By The Suppliers, A Registered Person Shall Only Avail 20% Of The ITC Which Have Been Uploaded By The Suppliers (Till Due Date I.E 10th Of Succeeding Month). OR

ITC To Be Availed By Registered Person For The Invoices Which Have Not Been Uploaded By The Suppliers <= 20% Of The ITC Which Have Been Uploaded By The Suppliers.

After That Central Board Of Indirect Taxes And Customs Circulated Circular No 123/42/2019- GST New Delhi, The 11th November,2019 To All The Pr. Chief Commissioners/Chief Commissioners /Principal Commissioners / Commissioners Of Central Tax,The Principal Director Generals / Director Generals (All) Regarding Subject: Restriction In Availment Of Input Tax Credit In Terms Of Sub-Rule (4) Of Rule 36 Of CGST Rules, 2017 - Reg.

Para 3 Reads As 'The Conditions And Eligibility For The ITC That May Be Availed By The Recipient Shall Continue To Be Governed As Per The Provisions Of Chapter V Of The CGST Act And The Rules Made Thereunder. This Being A New Provision, The Restriction Is Not Imposed Through The Common Portal And It Is The Responsibility Of The Taxpayer That Credit Is Availed In Terms Of The Said Rule And Therefore, The Availment Of Restricted Credit In Terms Of Sub-Rule (4) Of Rule 36 Of CGST Rules Shall Be Done On Self-Assessment Basis By The Tax Payers. Various Issues Relating To Implementation Of The Said Sub-Rule Have Been Examined And The Clarification On Each Of These Points Is As Under: -

Rule 36(4) Cannot Restrict Or Disallow The  ITC Claimed By Assessee
 

Sl. No

Issue

Clarification

1.

What Are The Invoices /Debit Notes On Which The Restriction Under Rule 36(4) Of The CGST Rules Shall
Apply?

The Restriction Of Availment Of ITC Is Imposed Only In Respect Of Those Invoices / Debit Notes, Details Of Which Are Required To Be Uploaded By The Suppliers Under Sub-Section (1) Of Section 37 And Which Have Not Been Uploaded. Therefore, Taxpayers May Avail Full ITC In Respect Of IGST Paid On Import, Documents Issued Under RCM, Credit Received From ISD Etc. Which Are Outside The Ambit Of Sub-Section (1) Of Section 37, Provided That Eligibility Conditions For Availment Of ITC Are Met In Respect Of The Same. The Restriction Of 36(4) Will Be Applicable Only On The Invoices / Debit Notes On Which Credit Is Availed After 09.10.2019.

...................Will Follow'

Here They Made It Clear To Their Officers That:

  • That Conditions And Eligibility Shall Be As Per Provisions Of Chapter V Of CGST Act And The Rules Made Thereunder.
  • That As This Is New Rule The Restriction Is Not Imposed Through Common Portal.
  • That It Will Be Responsibility Of The Taxpayer To Avail ITC As Per Rule 36(4) And It Should Be Done On Self Assessment Basis.

That The Last Date Of Invoices On Which The Restriction Shall Made Under Rule 36(4) Shall Be On Invoices/Debit Notes On Which Credit Is Availed After 09.10.2019.

Section 16: ' Eligibility And Conditions For Taking Input Tax Credit'

(2) Notwithstanding Anything Contained In This Section, No Registered Person Shall Be Entitled To The Credit Of Any Input Tax In Respect Of Any Supply Of Goods Or Services Or Both To Him Unless,- -

(A) He Is In Possession Of A Tax Invoice Or Debit Note Issued By A Supplier Registered Under This Act, Or Such Other Tax Paying Documents As May Be Prescribed;

(B) He Has Received The Goods Or Services Or Both.

Explanation.—For The Purposes Of This Clause, It Shall Be Deemed That The Registered Person Has Received The Goods Where The Goods Are Delivered By The Supplier To A Recipient Or Any Other Person On The Direction Of Such Registered Person, Whether Acting As An Agent Or Otherwise, Before Or During Movement Of Goods, Either By Way Of Transfer Of Documents Of Title To Goods Or Otherwise;

(C) Subject To The Provisions Of Section 41, The Tax Charged In Respect Of Such Supply Has Been Actually Paid To The Government, Either In Cash Or Through Utilisation Of Input Tax Credit Admissible In Respect Of The Said Supply; And

(D) He Has Furnished The Return Under Section 39:

..............................................Provided Also That The Recipient Shall Be Entitled To Avail Of The Credit Of Input Tax On Payment Made By Him Of The Amount Towards The Value Of Supply Of Goods Or Services Or Both Along With Tax Payable Thereon

  • It Means That The Recipient Is Eligible To Claim/Avail ITC If The 4 Conditions Mentioned Below Is Fulfilled:
  • The Recipient Should Have Invoice If Not Invoice Any Other Document For Eg:Proof Of Payment By Cheque /NEFT/RTGS Or Any Other Digital Mode .
  • The Recipient Must Have Actually Received Goods Or Services Or Both For This The Recipient Can Show E-Way Bill, Transport Builty Or Stock Or Any Other Document.
  • The Supplier Must Have Paid The Tax On This Supply Through Credit Ledger Or By Cash. Even If The Supplier Can Prove That He Has Paid Tax But In B2C And Not In B2B The Recipient Is Entitled For ITC As This Can Be Treated As Clerical Mistake And More Over If Recipient Pays Again It Shall Amount To Double Taxation.
  • The Recipient Has Filed His GSTR-3B Return.
  1. Now Lets Discuss Some Legal Terms
  • The Term 'Act': The Term 'Act' Refers To A Bill Which Has Been Passed Through Various Legislative Steps To Become An Enforced Law. So, The Act Is The Statute Which In India Needs To Be Passed By Both The Houses Of The Parliament (Lok Sabha And Rajya Sabha) To Be Operative. These Are Known As Primary Legislation. There Are Many Acts In India Dealing In Various Aspects Of The Law. Some Are Substantive While Some Are Procedural, While Some Can Also Be Private And Public.
  • The Term 'Rule': Rule, In Lay Man's Term, Means Anything Which Needs To Be Followed. Rules Are Standard Guidelines Which Provide For The Smooth Functioning Of An Organization.
  • Act & Rule(Difference): An Act Is A Law Or The Statute Which Has Been Passed By The Legislature And Approved By The President Of India.Rules, On The Other Hand, Help In Governing Law. They Are Secondary. They Are In Place To Make The Parent Act Work Effectively. Rules Provide The Details Which Have Not Been Provided For In The Act. However, Rules By No Means Can Go Beyond The Power Conferred By The Act, Or Extend The Same.
  • Can Rules Override Act: H'ble Supreme Court Has Held In Many Cases That 'Rules Cannot Override The Act'. In Mahavir Vs State Of Haryana & Othrs, State Of Haryana Vs. P.C Wadhwa, Ips, Inspector General, Commisioner Of Income Tax Vs Shri Padmanabhaswamy Temple Trust Etc Etc.

Questions & Answers:

Can Rule 36(4) Override The Section 16(2) Of The CGST Act?

No Rule 36(4) Cannot Override The Section 16(2) Of The Cgst Act As 'Rules Cannot Override The Provisions Of The Section Mentioned In The Act'.

Can The Department Disallow The ITC Under Rule 36(4)?

 

The Department Cannot Disallow The ITC Under Rule 36(4) If All The Conditions Of Section 16(2) Are Satisfied.

Can CBIC Issue Circular With Retrospective Date?

CBIC Cannot Issue Circular With Retrospective Date. In The Matter Of 'The Commissioner Income Tax Vs Gemini Distilleries' Hon'ble Supreme Court Has Clearly Held That 'CBDT Cannot Issue Circular With Retrospective Date'.

Is Circular Issued On 11.11.2019 Regarding Restriction Of 36(4) Applicable Only On The Invoices/Debit Notes On Which Credit Is Availed After 09.10.2019.

 

No As The Circular Was Issued On 11.11.2019 And The Date For Taking Credit For The Invoices Can Be Availed Only On The Invoices Availed Till 09.10.2019(Retrospective Date).

I Would Like To Know The Readers View Regarding This Article.

(The Next Article Will Be On The Loss Of Assessee If He Won't Avail ITC Available)

The author can also be reached at Kudiyal@Gmail.Com


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Category GST, Other Articles by - Mukesh Kuriyal 



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