Notification No : 49(CT) dt 09.10.2019

[Ragavan Vijayakumar]

Dear Export,

Refer : GST (CT) Notification no : 49 dt 09.10.2019

3. 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.”.

Kindly explain with suitable example above said point.

Kind Regards

V.Ragavan

[KASTURI SETHI]

A person who intends to avail ITC will suffer loss of 80% of ITC (credit being restricted to 20%), if the supplier does not upload the invoices. Non-uploading of invoices by the supplier may result in mismatch between GSTR 2A and GSTR-1/GSTR 3B. 80% loss(fear) is a sort of dis-incentive to the person availing credit so that all-out efforts should be made by the purchaser to force (nay, persuade) the supplier to upload the invoices issued by him (supplier).

Thus matching has become an absolutely must in the interest of the tax payer. After all the burden of proof is cast upon the buyer(who intends to avail ITC) under Section 155 of CGST Act.

[DR.MARIAPPAN GOVINDARAJAN]

What Sri Sethi says is absoluely correct.

[Ganeshan Kalyani]

I also agree with the views of Sri Kasturi Sir. This amendment requires a tax payer availing input tax credit to do GSTR 2A reconciliation on a monthly basis and intimate the supplier to upload/correct invoices in his GSTR-1 on monthly basis . This is a welcome step , though 80%credit is blocked if supplier does not upwards the invoice, it shows the total input tax credit available in his purchases. It might happen that tax layer claim major credits like GST on raw material, packing material etc.. but skip taking credit on telephone bills, repairing , air fare, cha Bill's etc. Now with the mandatory of reconciling 2A on monthly basis maximum input tax credit would emerge.

[KASTURI SETHI]

I like to add that the capping of 20% of availment of ITC is in respect of only those invoices which are missed (not uploaded) by the supplier during a month or tax period.

[MUKUND THAKKAR]

In Fact it is buyer responsibility to collect taxes, I am not agree with this notification, genuine Buyer suffer lot. and what is the remedy if suppler filed quarterly returns. same will be appearing after the three months. further it is not cleared about 20% of ITC of CGST/SGST/IGST

As per my view collect the taxes is responsibility of tax officer not Buyer.

[KASTURI SETHI]

Yes. Sir I agree with you in toto. I have just explained the Notification. Why should buyer suffer without his fault ?

[Shyam Naik]

The quantification of restriction on availing input credit is with reference to amount of invoices uploaded by suppliers.

For example, total input credit for a month is ₹ 120000/-. Input credit to the extent of ₹ 100000/- is reflected in GSTR-2A. The receipient can avail full credit, as ₹ 20000/- is within 20% of 100000/-(reflected in GSTR-2A).

In the above example, if only ₹ 15000/- is reflected in GSTR-2A, then the amount of eligible credit would be ₹ 18000/-{15000/-(As per GSTR-2A) + ₹ 3000/-(being 20% of ₹ 15000/- or ₹ 105000/- which ever is lower.}. Loss of credit is ₹ 102000/-. Loss % is 85%(102000/120000*100).

This provision shall not stand test of legal scrutiny. Recipient can not be penalized for no fault on his part.

[Ganeshan Kalyani]

I agree with the working of Sri Shyam Sir. Now, every company has to have a full time tax person whose job would be to call the supplier and persuade him to upload the invoice. And if he has uploaded but with incorrect details then ask him to correct the same. In such scenario, it is worth thinking of changing the GST clause in the agreement executed with the supplier.

[Alkesh Jani]

Dear Experts,

For sake of my knowledge, what if buyer avails 20% and later supplier files the return? what will be the scenario if supplier is filing return on quarterly basis and buyer is filing on monthly basis?

Further, (for brevity) Section 11(1) clearly states..... "from the whole or any part of the tax leviable thereon with effect...."

The section 16 nowhere even remotely indicates of any part of ITC. when no such expressed words is used, can this notification (however conditions and restriction can be of whole) empowers government for such ceiling of 20% ITC?

Thanks in advance

With Regards.

[Ganeshan Kalyani]

Sri Alkesh Ji , your concern holds good. The Govt is haste is incorporating changes in the law, may be to increase the GST revenue. The govt is not getting the envisaged revenue. Lot of defaulters are evading tax. Beacuse of them the genuine tax payer suffers.

[Shyam Naik]

This provision should be challanged immediately by of writ petition.

It is Government's duty to enforce the supplier to file appropriate return.

There are many cases in VAT matters, where ITC has been allowed in cases the supplier have not reported sales The legal provision to disallow ITC has been struck down by High Courts

[Alkesh Jani]

Dear Experts,

I wish to raise a query in addition to raise earlier

(1) When GSTR-2 and GSTR-3, filing date is yet to be notified (Section 37 & 38), then on what ground filing of GSTR-2A (part of GSTR-2) and GSTR-3B (Part of GSTR-3) can be base for availment of ITC?

Thanks in advance.

With Regards

[Madhavan iyengar]

All experts have given their very good analysis

I would like to add following:

Reflection of credit in GSTR-2A is not the only criteria since 2A contains all eligible and ineligible credit ( ie negative list) so the bifurcation of ineligible credit is to be done and taken out, to determine the eligible ITC for a particular month and thereafter the rules of 20% to be applied on the eligible ITC

Experts please clarify from when this would become applicable ie from Month of October 2019 or date to be notified

[KASTURI SETHI]

The subject notification does not appear to be in letter and spirit of Section 16 of CGST Act.

[Alkesh Jani]

DearKasturiji Sir,

I agree with you further wish to add that the said notification is also not in harmony with the provisions of Section 42 and Rule 69 of CGST Act, and Rules respectively.

Thanks

With Regards

[KASTURI SETHI]

Dear Sh.Alkesh Jani Ji,

Yes. You are right. 20 % capping will not yield any viable results. Actually ITC facility should be dispensed with, especially, keeping in view a large number of fraudulently availed modvat credit/cenvat credit/ITC cases detected by the Department during the period from 1986 to 2019 (till date). ITC is a set back to revenue collection. It is not in the interest of the nation. It is legalised loss of revenue to the nation. There should be lowest rate of tax without ITC and no weightage should be given to the concept of cascading effect.

[Ganeshan Kalyani]

The option thought of by expert thar the input tax credit mechanism should be replaced with the reduced rate of output tax which means supplier has to just apply certain percentage on the taxable turnover and arrive at the tax payable and discharge the same to the government. The compliance would become very very simple. No complication. No need for 2A reconciliation.

[Mandar Sathe]

Is there any clarity on the following points:

1. RCM credit

2. ITC on Import of Goods.

3. ITC on Import of Services.

In all the above category the ITC will never be reflected in 2A.

Also the limit is 20% of Eligible ITC. Can I go on availing 20% every month for eg 1 invoice having ITC 100 Rs. I avail 20% of Eligible ITC on Month 1 and balance in subsequent months. thereby ensuring that I avail all the ITC at the end (even those not reflected in 2A and still complying the 20% criteria.

AI Summary

GST Notification Limits ITC to 20% Without Supplier Invoices; Sparks Debate on Compliance and Legal Challenges A discussion on a GST notification regarding input tax credit (ITC) limitations sparked numerous responses. The notification restricts ITC to 20% of eligible credit if suppliers fail to upload invoices, causing potential losses for buyers. Participants debated the implications, with some agreeing on the need for monthly GSTR 2A reconciliation and supplier engagement to ensure compliance. Concerns were raised about the notification's alignment with existing laws and its potential legal challenges. Suggestions included simplifying tax processes by eliminating ITC in favor of reduced tax rates. Questions about specific ITC scenarios, such as reverse charge mechanism and imports, were also discussed.