GST implications on ITC availment basis Invoices and Debit Notes not uploaded by suppliers
Section 16(2)(aa) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’), inserted vide the Finance Act, 2021, has been made effective from January 1, 2022. This provision introduces a new condition for availment of Input Tax Credit (‘ITC’) namely a recipient will be eligible to claim ITC only if its supplier uploads Invoices and Debit Notes in its statement of outward supply and same are communicated to recipient. The following points regarding this provision are noteworthy:
- Presently, Rule 36(4) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules) allows buffer for availment of ITC on Invoices and Debit Notes not uploaded by suppliers to the extent of 5 percent of ITC on uploaded Invoices and Debit Notes. With this change, buffer of 5 percent will become ‘Nil’ and Rule 36(4) will become redundant.
- For Rule 36(4), Circular No. 123/42/2019-GST dated November 11, 2019 clarified that it would apply only to Invoices and Debit Notes on which ITC is availed after date of enactment of the said Rule. Applying this logic, this restriction will apply to ITC availed post January 2022 for which GSTR-3B will be filed in February 2022 or later.
NITYA Comments: With this change, taxpayers will need to mandatorily undertake monthly ITC reconciliation before filing their GSTR-3B. This will significantly increase compliance burden for taxpayers specifically smaller ones. Practically, even today, department allows ITC only on those procurements where suppliers have filed GSTR-3B to ensure that suppliers have paid tax and complied with other requirements of Section 16.
Notably, this amendment refers to eligibility of ITC basis details communicated to recipient in manner specified in Section 37 (GSTR-2A in terms of Rule 60(1) of the CGST Rules). However, department’s understanding as well as GSTN’s Advisory suggests that reconciliation should be done basis GSTR-2B. As GSTR-2B is nothing but GSTR-2A as on a particular date, taxpayers can adopt GSTR-2B for undertaking reconciliation in order to avoid dispute from department.
Since ITC is considered to be availed on date of filing of GSTR-3B, this change will apply to GSTR-3B filed for December 2021 (in January 2022) as well.
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