GST_Rule_36-4_Explanation

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06-04-2020

The understanding has been explained as under (presuming that there is no past adjustment for period prior to Feb 2020):

An example of How to follow this Rule 36(4) is given in tabular form

Note: Adjustment of total shortfall of ITC as per Rule 36(4) shall be done in September 2020

Analysis:

The restriction to limit the available ITC to uploaded invoices only (uploaded by supplier in their GSTR 1) has been relaxed.

The restriction thus, now applies to total eligible ITC as available to the recipient as per Section 16(2)

Thus, the total ITC which can be availed during Feb 2020 till Aug 2020 shall be ITC as per Section 16(2) plus invoices ITC of which was not availed in period prior to Feb 2020 due to applciaiton of Rule 36(4) or any other reason.

Adjustment of entire period from Feb 2020 to August 2020 by applying Rule 36(4) shall be made in September 2020.

This can lead to negative value also (suppose available ITC in Septemebr as per Rule 36(4) is Rs. 100 but excess ITC applying Rule 36(4) for Feb 2020 to Aug 2020 comes to Rs. 120). Taxpayer would be required to pay such amount in cash.

In case of negative figure, it is to be shown in September GSTR 3B in column ‘other ITC reversed’

Rule 36(4) is not to be followed on monthly basis now, meaning, though it will apply for a period (during February – September 2020) as a whole, its compliance on a monthly basis is not required on monthly basis.

Entire shortfall shall be adjusted in September 2020 (by taking less ITC or reversing ITC as is in excess of 10% of total ITC uploaded during February – September 2020).

Only cumulative condition shall be applied in September viz, ITC of total invoices for the period from February 2020 to September 2020 which are not uploaded by the supplier shall not exceed 10% of the Total ITC on the invoices of such period which are uploaded by the supplier and any adjustment for period shall be made in September 2020.

Full ITC of supplier filing GSTR -1 on Quarterly basis can be availed during February – August 2020, however, adjustment for such unadjusted ITC shall be made in September 2020.

The Notification does not allow recipient to avail ITC relating to invoices for period prior to February 2020 which were not availed earlier due to application of Rule 36(4) till they are uploaded by the supplier in GSTR-1.

No interest is to be paid for such availment of ITC during such period and even when such amount is adjusted in September 2020.

Recepients should be cautious of persons not uploading their invoices, and should follow them for uploading the invoices as the compliance is relaxed and not removed.

The provision aims to provide relief to cash cruched taxpayers whose business are impacted in the lockdown period, however, this shall be a period wherein the devious elements who are engaged in fake invoices shall also mushrrom due to removal of GSTR 3B vs GSTR 2A check.

So, take utmost care that the supplier regularly and correctly files his Gstr 1 and the itc calculation do be done as above

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