Recent Amendments - Rule 36(4) of CGST Rules & GST E- Invoicing.

Recent Amendments - Rule 36(4) of CGST Rules & GST E-Invoicing

GST has been a major structural reform of the current government. Replacing multiple taxes of state and central governments into a single tax has given a major relief to trade and industry. However, since the introduction of GST in India in 2017, it has seen several changes. The current article covers some of such significant changes in GST introduced by the Government primarily to curb tax evasion.

The Data For GST Collection In The Financial Year-

• April 2019 - 110000 To 120000

• May 2019 - 100000

• June 2019 - 100000

• July 2019 - 100000 To 105000

• August 2019 - 90000 To 100000

• September 2019 - 80000 To 100000

• October 2019 - 90000 To 100000

The data clearly depicts a downward trend in GST collections on a monthly basis. In fact, the collections dropped sharply to a 19-month low of Rs 91,916 crore in September 2019. Consequently, the Government has been keen to plug revenue leakages and has made some key amendments in the GST Act and Rules. Detailed analyses of significant amendments in the GST Rules are explained below:-

1) Rule 36(4) Of The CGST Rules 2017-

As per the new rule 36(4) inserted vide a taxpayer can claim provisional Input Tax Credit (ITC) only to the extent of 20% of the eligible credit available, in respect of invoices or debit notes, the details of which have been uploaded by its suppliers.

The following are a few important points to be noted w.r.t. Rule 36 (4):-

• GST Portal does not have the functionality to restrict Input Tax Credit. Input Tax Credit in accordance with the newly introduced rule has to be calculated on a self-assessment basis.
• Applicable only on Invoices/ Debit Notes on which credit is availed after 09th October 2019.
• The restriction is not supplier wise but linked to overall eligible credit.
• ITC Restriction, i.e. 20% of eligible ITC to be calculated on the basis of GSTR-2A as available on the due date of filing GSTR-1.
• No restriction on ITC in respect of IGST paid on imports, Reverse Charge Mechanism, credit received from Input Service Distributor.

GST Council in its 38th Meeting on 18th December 2019 has further restricted ITC for invoices that have not been uploaded by suppliers to 10% of eligible credit available in respect of invoices or debit notes reflected in FORM GSTR-2A.

Following challenges arise in front of taxpayers while ensuring compliance:-

• Regular follow-up with suppliers to minimize loss or delay in availing of ITC.
• Archival of GSTR-2A and its reconciliation in order to evidence compliance of the newly inserted sub-rule.
• Dealing with suppliers who are filing quarterly returns. This may also impact the business of small and medium enterprises as big corporate may not be willing to work with dealers who file their GSTR-1 on a quarterly basis.

2. E-Invoice-

What is E-invoice?

E-invoice does not mean the generation of electronic invoices on GST Portal but reporting of electronic Invoice. E-invoice is an invoice which has unique invoice reference number (‘IRN’) generated by Invoice Registration Portal (‘IRP’)

E-invoice will be created by Taxpayers on their own accounting/billing/ERP System. The e-invoice, as prepared, will be reported on Invoice Reference Portals (IRP). IRP will generate a unique Invoice Reference Number (IRN) which will be attached to the e-invoice and the system will digitally sign the same and return to the taxpayer (supplier) as well as the recipient. 

Advantages of E-invoice

E-invoicing will act as a double-edged sword which will have the following benefits:-

Increase ease of doing business

• GST System will generate an E-way bill from the E-invoice data. This will eliminate manual processing time and errors.
• Once fully rolled out, GST System will prepare the Return where only a few details like B2C sales, imports, etc. will have to be filled by taxpayer and taxes paid. 

Curb Tax Evasion

• Tax authorities will have access to transactions as they take place in real-time.
• There will be less scope for the manipulation of invoices since the invoice gets generated prior to carrying out a transaction.
• It will reduce the chances of fake GST invoices and the only genuine input tax credit can be claimed as all invoices need to be generated through the GST portal.