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GST Input Restriction under Rule 36(4)

By Sudarsan.S.K

Recent Restrictions Imposed on Availing Input in GST

Recently many incidents involving claiming of fake inputs to the tune of many crores were detected by GST department through fake invoices and which were not filed in GSTR 1/ 3B and tax paid. The GST council with a view to curtail such fake input claims and to promote Registered persons to file their GSTR 1 promptly, had decided to restrict input available on Bills which are not reflecting in GSTR 2A to 20% of the total eligible input in GSTR 2A. Also rules were amended to empower GST Officials to deny input to the buyer in cases of such fake invoices. Accordingly Notification 49/ 2019 dated 09-10-2019 was issued inserting sub rule 4 in Rule 36 and Rule 86A was also inserted via Notification 75/2019 dated 26-12-2019. We will be discussing the points to be kept in mind while claiming inputs to avoid penal consequences.

The rule 36(4) inserted via Notification 49/2019 dated 09-10-2019 is as laid down below.

“(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.”..

For clarification of Doubts and ease the procedural compliance, a clarification on this was issued via Circular No. 123/42/2019 dated 11-11-2019.

Later on to ensure further compulsory filing of Pending GSTR 1 returns, the input restriction has been reduced to 10% from 01-01-2020 via Notification 75/2019 dated 26-12-2019.

Accordingly the points to be kept in mind while claiming monthly GST Input are

1. Input is available for Eligible Invoices appearing in GSTR 2A as on 11^th of Next Month.
2. Ineligible invoices under this include invoices dated this month but goods not received or the goods or services mentioned in the invoice are ineligible inputs u/s 17(5).
3. The Additional input allowed for bills not appearing in GSTR 2A in a month is 10% of the eligible input of that month.
4. The restriction does not apply for

• Import Invoice IGST Paid
• Expense on which GST is paid under Reverse Charge and input claimed.

5. The restriction is based on Monthly Input and not supplier wise.
6. ITC available as per Invoices appearing as on 11^th of the month being due date of GSTR 1 is to be considered.
7. The eligible additional input towards invoices not appearing in GSTR 2A is 10% of the input on eligible invoices subject to the maximum of the input on bills not appearing in GSTR 2A.
8. The input on invoices not appearing in GSTR 2A during return filing in a month which were subsequently filed and came in GSTR 2A, such unclaimed or partially unclaimed input can be claimed in subsequent month in which it appears in GSTR 2A.
9. Pay GST portion of an invoice to your supplier only if he has uploaded the invoice in GSTR 1 and the same appears in your GSTR 2A.

Also in Notification 75/2019, to avoid availing input based on Fake Invoices Rule 86A was introduced laying down “conditions for use of amount available in electronic credit ledger”

“86A. Conditions of use of amount available in electronic credit ledger.-

(1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as

1. a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36-
2. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or
3. without receipt of goods or services or both; or
4. b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or
5. c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or
6. d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36,

may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount.

(2)The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.

(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.”.

Accordingly the points to be kept in mind are

1. Ensure genuineness of your supplier before purchasing by collecting his GST registration Certificate copy and cross checking it with GST Site.
2. Verify the GST return status of the supplier in GST Site and Ensure that the supplier is filing GST Returns on a timely basis and paying TAX.
3. Do not pay the GST portion in a purchase invoice to the supplier unless the invoice appears in your GSTR 2A.
4. Collect and Keep originals of all invoices from supplier and keep them in safe custody.

The GST provisions and their implementation is becoming more strict and the department is collecting data about every business and their transactions through multiple indirect sources and processing them using data Analysis Software’s and Artificial Intelligence systems to identify malpractices and frauds. So it is advised to do genuine business and to comply with input related provisions with care to avoid future penal actions and legal liabilities.

The author is a GST Practitioner and Trainer based in Calicut and contacted at sudarsan@snco.co.in

SUDARSAN.S.K

CEO, SNCO GROUP