Problems In Application of Rule 36(4) of CGST Rules, 2017

Problems In Application of Rule 36(4) of CGST Rules, 2017-

GST council, after reviewing the large gap between return filling percentage ( from April 19-JUL 19)   of form GSTR -1  & Form GSTR -3B which is around 50% as against 80% GSTR -3B leading to huge unmatched ITC and in order to fill the gap till the introduction of new return system w.e.f. 01.04.2020, has introduced a time gap arrangement by way of Rule 36(4) of by imposing restriction in lines with Section 43A (4) of the CGST Act 2017.

For speeding up recovery and early deposition of tax, first Notification No. 49/2019 was issued by CBIC which was later on amended vide Notification No. 75/2019 read with clarification No. 123/42/2019.

After an amendment, this rule can be read as under:-

“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 subsection (1) of section 37, shall not exceed 10 percent of the eligible credit available in respect of invoices or debit notes the details of which have uploaded by the suppliers under subsection (1) of section 37. “

For complying with the above rule, the registered person has to match the amount available in its GSTR -2A before availing the Input Tax Credit and then only he is eligible to avail the ITC subject to the restrictions mentioned in the above rule.

Challenges faced by the registered person while applying Rule 36(4) of CGST Rules, 2017.

• The auto calculation/matching is not made by the GST portal between ITC of GSTR 2A & GST 3B and it is left upon the registered person to calculate the claimable ITC before filing the GSTR-3B.

• The taxpayer has to ascertain the amount of ITC in auto-populated GSTR 2A as available on the due date of filing of Form GSTR -1 under subsection (1) of section 37, which is next to impossible as GSTR 2 A is a dynamic report which keeps on changing and GSTN is not giving any facility to give report of GSTR 2A on the due date of filing of GSTR -1.

• 3. The restriction imposed by rule 36(4) will be applicable only on the invoices/ debit notes on which credit is availed after 09.10.2019 but GSTR 3B does not provide for the breakup of input credit taken for the invoices/debit notes issued before 09.10.2019 but taken in the returns filed after this notification, which leads to mismatching advisories are being issued by the department.

• The registered person is also entitled to avail the GST input on the supplies received from the registered person who are liable to file their GSTR – 1  on quarterly basis ( for which the due date is last day of the month following the quarter) i.e after the gap of about  2-4 months, which is otherwise available to him on month to month basis.

• Department, instead of taking care of practical problems being faced by the registered persons, has started sending advisory emails mentioning to reverse the amount of credit availed in excess or deposit the same through DRC -03 with applicable interest. In its so-called advisory mail it is mentioned that in case the opportunity for voluntary compliance as suggested is not availed, appropriate action for recovery of excess ITC availed with interest and imposition of penalty shall be initiated as per law which may create panic amongst the genuine taxpayers.