Rule 36(4) ITC Restrictions to 10% Cap - due to COVID-19 issue - & Lockdown all over India , how can we take ITC Credit - Need guidance please.

[venkataraman swaminathan]

Dear Sir

Good Morning

As per the present situation of Lockdown all over India and as per the Press Release & as per Finance Minister's announcement , time limit / due date / for all the GST Returns are extended up to June 2020. In these circumstances for the month of March 2020 , purchases, the supplier / service providers /vendors will avail the due date extension and hence they may file their GSTR-1 returns for March 20 belatedly , not on or before 11.04.2020 (falls in the Lockdonw period) . Hence for our ITC Credit by 2A & GL reconcilation will affect huge quantum of Short fall of ITC credit . How can we handle this (Rule 36(4) cap 10%) for Utilization of the ITC . Is there any relaxation in Rule 36(4) . Request guidance on this for March 2020- ITC credit for GSTR-3B .

thanks/regards

v Swaminathan

[Kashish Gupta]

Dear V Swaminathan Ji,

Attention may be given to NN 31/2020-CT posted on official gazette of India on April 03, 2020 vide G.S.R. 230(E) wherein it has been provided that said condition shall apply cumulatively for the period February, March, April, May, June, July and August 2020. Therefore, you are required to take effect of all adjustments for the period February 2020 to August 2020 while filing return for the tax period September 2020.

However, i would like to mention that said sub-rule is clearly is excess of the powers and therefore, ultra-vires to the provisions of section 16(2)(c) of the CGST Act, 2017. This is because of the reason that as on date matching provisions shall stand deferred on account of proviso to Rule 69 of the CGST/SGST Rules, 2017 and therefore, entire credit i.e. the one available in Form GSTR-2A and the one manually claimed by the recipient on the basis of tax invoice available with him, is the provisional credit in terms of section 16(2)(c) of the Act ibid.

[Ganeshan Kalyani]

You are allowed to take credit based as per your books of accounts. That is purchase is accounted in your books, which means goods is received, tax invoice is in possession and also the payment to the supplier is made withing 180 days. Because all these conditions are not relaxed. The only relaxation given is that the invoice on which the credit is sought to be taken need not necessary be appearing in 2A report. This is for the very simple reason that most of the taxpayer's compliance is expected to be delayed because of the circumstances prevailing these days.

[So B]

I agree with Kashish Ji. You can go through the video to go through all the relief measures provided during lockdown.

[CA Seshukumar]

Dear Swaminathan,

I would like to suggest that Rule-36(4) has to be applied cumulatively starting from Feb to Aug. It means that for each month the ratio of unavailable credit/available eligible credit (2A) must be equal to 10% or less than that and also if cumulatively if we prepare the same calculation for 2 or more periods together.

and also it may be noted that the due date for filing of GSTR-1 has not been extended due to COVID-19. only late fee has been waived off while retaining the due date in tact.

[CA Seshukumar]

Dear All,

While section 43B is not yet notified due to various reasons, it is construed by many experts that Rule 36(4) is ultra wires to the act stating that the relevant section i.e 43B is not yet notified.

In this regard , i would like to state that the section.16 as well as 41 has the relevant power under which the said rule has been inserted and hence the said rule may not be looked as if it is ultra wires to the act.

AI Summary

Discussion on COVID-19's Impact on GST ITC Under Rule 36(4) and Extensions for Filing Deadlines A participant raised a query about the impact of COVID-19 on Input Tax Credit (ITC) under Rule 36(4) of the GST, specifically regarding the 10% cap and the lockdown's effect on filing deadlines. Responses highlighted that the government extended the GST return deadlines, allowing cumulative adjustments for February to August 2020 to be made in September 2020 returns. Experts debated the rule's validity, with some considering it ultra vires due to deferred matching provisions. Others advised that ITC claims could be based on accounting records, even if not reflected in the GSTR-2A report, due to compliance delays during the lockdown.