The Society for Tax Analysis and Research (STAR) has submitted some of the foreseen issues in the newly introduced Rule 36(4) of Central Goods and Services Tax Rules 2017.
The Society for Tax Analysis and Research has submitted following the suggestions before Finance Minister Nirmala Sitharaman:
Impact on small suppliers filing GSTR 1 on a quarterly basis
1.1. It is humbly provided in the sub-rule that the input tax credit in respect of invoices or debit notes. the details of which have not been uploaded by the suppliers under sub-section (1) of section 37 shall not exceed 20 per cent, of the eligible credit. The issue is not addressed here. what will happen in a situation where the supplier is a small entity (Having turnover up to Rs. 1.5 Crores) and covered under the special class of persons who are required to file their outward supply return on a quarterly basis
1.2. In this situation the Input tax credit will get reflected in GSTR 2A of the recipient only after the end of quarter and hence the recipient may be deprived of the eligible credits (to the extent of 80% of the eligible credit as not so reflected) also just because the supplier is a small taxpayer required to file returns quarterly under the scheme of law
1.3 This may also lead to a situation where the recipient shall stop purchasing from such small taxpayer and hence this will cause a big loss to such small suppliers. This we believe is not at all the intention of the lawmakers but can emerge as a consequence.
The ‘STAR’ suggested that suitable amendment be made in the form GSTR-35 to provide a separate table/column for filling figures of Input Tax Credit related to purchases from small taxpayers. Further, to make it effective, the suitable amendment to this extent be made in the Rule to allow full credit during the quarter in respect of small taxpayers.
Regarding Input Tax Credit differences arising out of month-end movement of goods or services, the ‘STAR’ also suggested that, suitable amendment be made in the form GSTR-3B to provide a separate table/column for filling figures of Input Tax Credit of purchases whose amounts are reflected in GSTR 2A but are not claimed and are carried forward and such balances be added to GSTR 2A balance for all comparison purposes in subsequent periods. Also, the suitable amendment is made in the Rule to allow this limit of 20% to be considered at the quarter as a whole so that matching can be done at least at quarter rests which would decrease such kinds of movement differences.
The ’STAR’ also put forward concerns over Input Tax Credit reclaimed as reversed under Section 16 (2), Absence of Mechanism of verification of ineligible credits and Absence of matching tool shall put constrains on taxpayers resources.
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