GST ITC available when reflected in GSTR 2A/ 2B w.e.f. January 01, 2022

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Background:

The Hon’ble Finance Minister, in Budget 2021-22, proposed changes vide the Finance Bill, 2021, that amends the Central Goods and Services Tax Act, 2017 (“the CGST Act”) to insert a  new condition for availment of Input Tax Credit (“ITC”) under the GST.  Accordingly, amended Bill was passed in Rajya Sabha, the upper house, and it received presidential assent vide Finance Act, 2021.

Relevant provisions:

The CBIC vide Notification No. 39/2021–Central Tax dated December 21, 2021 notified the below mentioned amendments made vide Section 109  of the Finance Act, 2021 w.e.f. January 01, 2022:

Section 16(2) – Eligibility and conditions for taking input tax credit – Section 109 of the Finance Act, 2021

Current provisions

Notified provisions

——-

After clause (a), in sub-section (2) of Section 16, the following clause shall be inserted:

“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.”

Our comments:

New condition to avail Input Tax Credit:

It was been proposed to insert the new clause ‘(aa)’, after clause (a), in Section 16(2) of the CGST Act, that provides an additional condition to claim ITC based on GSTR-2A and newly introduced GSTR-2B, i.e., ITC on invoice or debit note can be availed only when details of such invoice/debit note have been furnished by the supplier in his outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note.

Hence, w.e.f. January 01, 2022, following conditions need to be satisfied under Section 16(2) of the CGST Act for availing GST ITC on inward supplies of goods or services or both:

  • The recipient is in possession of tax invoice or debit note issued by a supplier;
  • The details of the above-mentioned invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient in the manner specified under Section 37 of the CGST Act;
  • The recipient has received the goods or services or both;
  • The tax charged in respect of such supply has been actually paid to the Government and
  • The recipient has furnished the return under Section 39 of the CGST Act.

No relevance of 5% limit mentioned in Rule 36(4) of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”)

This amendment was proposed to avoid the unnecessary litigation and writ petitions challenging the validity of Rule 36(4) of the CGST Rules that prescribes the similar condition with 5% limit to avail ITC on invoices/debit notes not uploaded by the supplier in GSTR-1 (as amended vide Notification No. 94/2020- Central Tax dated December 22, 2020 w.e.f. January 01, 2021) which will be of no relevance w.e.f. January 01, 2022 as the recipient would not be able to take any ITC if the same is not coming in recipients GSTR-2A and/or 2B.

To know more, kindly see our video:

The Notification can be accessed at: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-39-central-tax-english-2021.pdf

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