Rule 36(4) – An Additional Condition to Avail Input Tax Credit under GST
We all know that recently, in exercise of the powers conferred by Section 164 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), the Central Government has issued a the recommendations of the Council. Notification number 94/ 2020 – Central Tax Rules, 2017 (“CGST Rules, 2017) prominently with:-
- In some cases GST registration can be canceled or suspended under the CGST Rules, 2017 21A at the discretion of the tax officer;
- Changes in Rule 36(4) of CGST Rules, 2017 from 1st January, 2021 – Recipients can claim provision Input Tax Credit (“ITC”) in GSTR – 3B to the extent of 5% instead of earlier 10% of the total ITC available in GSTR – 2B for the month;
- Some taxpayers cannot pay more than 99% of the total tax liability from their electronic credit account for the tax period.
- Rules regarding validity and blocking due to notified changes in e-way bill, non-filing of GSTR-3B.
Now, we would like to discuss and deal herein only with regard to change in Rule 36(4) of CGST Act, Rules from 1st January, 2021. It is started that a new provision as ‘Section 43A’ ‘regarding procedure for furnishing return and availing Input Tax Credit’ was inserted vide CGST (Amendment) Act, 2018 (the ‘Amendment Act, 2018’). It is notable Amendment Act, 2018 was notified w.e.f. 1/2/2019 by Notification No. 2/ 2019 – Central Tax dated 29th February 2019 but some sections [i.e. clause (b) of section 8, section 17, 18, clause (a) of section 20, sub – clause (i) of clause (b) and sub – clause (i) of clause (c) of Section 28] of the said amendment is to be notified yet. Section 18 of amendment Act, 2018 talks about insertion of new Section 43A in CGST Act, 2017.
More important thing for which we would like to draw your kind attention herein is regarding sub – section (4) of Section 43A of the CGST Act, 2017 that is-
“43A (4) The procedure for availing input tax credit in respect of external supplies not furnished under sub – section (3) shall be as follows, and such process may include maximum amount of input tax credit. , Which can be availed. , No more than twenty percent. Input Tax Credit available based on the details submitted by suppliers under the available sub-section.”
Again, please note that the said provision had not yet been notified.
Later on, the Central Board of Indirect Taxes (“CBIC”) having power in section 164 of the CGST Act, 2017, released a crucial Notification number 49/ 2019 dated 9th October, 2019 by which a new sub – rule (4) under Rule 36 of the CGST Rules, 2017, was inserted.
The Rule 36(4) in words of the law is-
“(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 supplies under sub – section (1) of Section 37, shall not exceed 20 % 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.”
Rule 36 provides ‘documentary requirements and conditions for claiming input tax credit’ under Chapter 5th Input Tax Credit. Rule 36(4) restricts the credit relating to the invoices not uploaded by the suppliers in their form GSTR – 1 to the extent of 20% (10% w.e.f. 1/1/2020 Notification number 75/ 2019 Central dated 26th December, 2019 and 5% w.e.f. 1/1/2021 vide Notification number 94/ 2020 – Central Tax dated 22nd December, 2020). It provides that Input Tax Credit can be here after claimed in the GSTR – 3B only to the extent of 120% of eligible ITC reflected in GSTR – 2A in aggregate.
Rule 36 (4) is concerned with regard to restriction on the availment of ITC in cases where GSTR – 1 has not been uploaded by the suppliers under sub – section (1) of section 37. It is important to note that this newly inserted rule is a substantive condition to be fulfilled for the availment of Input Tax Credit in additional to conditions prescribed under Section 16 of CGST Act, 2017.
For example:-
| Particulars | Amount (in Rs.) |
| Eligible ITC appearing in GSTR2A (on the basis of GSTR – 1 filed by the counterparty) | 100 |
| Eligible ITC not appearing in GSTR2A (on the basis of not filed in GSTR – 1 by the counterparty) | 40 |
| Total eligibility ITC on inward supplies (a + b) | 140 |
| Maximum Permissible ITC in GSTR3B on Self – assessment basis (a*120%) | 120 |
We know that prior to the introduction of the above notification entire eligible Input Tax Return of Rs 150 can be availed by the taxpayer in GSTR3B return. However, with effect from 9th October 2019 out of eligible Input Tax credit not appearing in GSTR2A of Rs 50, a sum of Rs 20 can only be claimed in GSTR3B of the current month. Remaining ITC of Rs 30 can be claimed in the subsequent months when the corresponding invoices are uploaded by the suppliers in GSTR1.
For your reference only, please note that ITC once avails Credit 16 (Rules Theto) for electronic credit of registered person and can be used for payment of production tax as per section of CGST Act, 2017. 49 is provided in.
After the amendment in Rule 36 (4) by Notification number 94/ 2020 – Central Tax dated 22nd December, 2020, it may read as under-
“(4) Input tax credit received by a registered person in respect of invoices or debit notes, details of which are not presented in Form GSTR-1 or using the invoice submission facility, more than 5 percent will not done. Eligible credit available in respect of invoice or debit, details of which are presented in form GSTR-1 or using the facility of challan submission.”
Summarized Position before and after introduction of Rule 36 (4) w.e.f. 9/10/2019 and with latest amendment vide notification number 94/ 2020 – Central Tax dated 22nd December, 2020.
Input Tax Credit Mechanism before introduction of Rule 36 (4) (before 9/10/2019):-
| Particular | Amount (in Rs.) |
| No of Invoice | 100 |
| Eneligible Input Tax Credit appearing in GSTR2A (on the basis of GSTR – 1 filed by the counterparty) | 100000 |
| Ineligible Input Tax Credit | 20000 |
| GSTR 2A (Based on not recorded in GSTR) Qualified ITC – 1 by counterparty) | 5000 |
| Total eligible ITC (A + C) on incoming supply | 105000 |
| Maximum permissible ITC (a + c%) in GSTR3B based on self – assessment i.e. d | 105000 |
ITC Mechanism after introduction of Rule 36 (4) (i.e. w.e.f. 9/10/2019 to 31/12/2019):-
| Particular | Amount (in Rs.) |
| Number of Invoice | 100 |
| Qualified Input Tax Credit appearing in GSTR2A (based on GSTR-1 file by the counterparty) | 100000 |
| Ineligible Input Tax Return | 20000 |
| Eligible Input Tax Returns do not appear in GSTR 2A (based on not being recorded in GSTR – 1 by counterparty). | 6000 |
| Total eligible Input Tax Return on supply (a + c) | 106000 |
| The maximum allowable Input Tax Credit (a*20%) in GSTR3B i.e. Rs. 20000 or Rs. 6000 whichever is lower, therefore, Rs. 100000 + Rs. 6000 = Rs. 106000 | 106000 |
ITC Mechanism after introduction of Rule 34 (4) (i.e. w.e.f. 1/1/2020 to 31/12/2020):-
| Particular | Amount (in Rs.) |
| Number of Invoice | 100 |
| Qualified Input Tax Credit appearing in GSTR2A (based on GSTR-1 file by the counterparty) | 100000 |
| Ineligible Input Tax Return | 20000 |
| Eligible Input Tax Returns do not appear in GSTR 2A (based on not being recorded in GSTR – 1 by counterparty). | 6000 |
| Total eligible Input Tax Return on supply (a + c) | 106000 |
| The maximum allowable Input Tax Credit (a*10%) in GSTR3B i.e. Rs. 10000 or Rs. 6000 whichever is lower, therefore, Rs. 100000 + Rs. 6000 = Rs. 106000 | 106000 |
Input Tax Credit Mechanism after introduction of Rule 36 (4) (i.e. w.e.f. 1/1/2021):-
| Particular | Amount (in Rs.) |
| Number of Invoices | 100 |
| Eligible Input Tax Credit appearing in GSTR2A (on the basis of GSTR – 1 filed by the counterparty) | 100000 |
| Qualified Input Tax Credit | 20000 |
| Qualified Input Tax Credit not appearing in GSTR2A (on the basis of not filed in GSTR – 1 by the counterparty) | 6000 |
| Total Eligible Input Tax Return on inward supplies (a + c) | 106000 |
| Maximum Permissible ITC in GSTR3B on self – assessment basis (a*10%) i.e. Rs. 5000 or Rs. 6000 whichever is lower, therefore, Rs. 100000 + Rs. 5000 = Rs. 105000 | 105000 |
| Input Tax Credit carried forward to the subsequent tax period subject to the requisite invoices uploaded by the suppler | 1000 |