Under the GST regime, the finance ministry has circulated a notice dated 1st Jan 2022 as the date towards the norms pointing 100% invoice matching essential for GST ITC (Input Tax Credit).
Towards every taxpayer, the framework computes GST ITC based on the return furnished through his or her supplier. “These curb the chance of overstating ITC and taking benefits more than due.” Before that, the rules permitted the taxpayers to opt for 10% more GST ITC excluding the supported invoices that were formerly get diminished to 5%. From 1st January the same provision shall not be subjected and 100% invoice matching shall be needed.
Conditions & Eligibility Under GST ITC
The same shall be subjected due to the revisions in the finance act 2021 that draws a new clause in section 16, that deals within the eligibility and conditions to avail Income tax credit. There are 4 situations for GST ITC to get credited towards the taxpayer for the supply. Firstly he owns a tax invoice for the debit note provided through the enrolled supplier or such additional tax-paying documents.
The other one is that he has obtained the goods or services or dual. The third one is the tax has truly been furnished on the supply and the last one is the return needs to get furnished.
Post to the 1st conditions another clause have been summed that directs towards “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.” the same situation shall be effected from 1st January.
GST ITC Relevance of Rule
As per Smita Singh, partner at S&A Law Offices, now with the amendment, Rule 36(4) which permits the recipient to claim the ITC under GST towards the invoices information of which was not get filed through the supplier in the GSTR-1, seems to lose its relevance since the recipient shall unable to claim an Income tax credit if that is not mentioned in the recipients GSTR-2A/2B.
“Another question that remains post the amendment is whether Rule 36(4) of the CGST Rules will be allowed to operate since the department may try to limit availment of GST ITC for invoices that have been uploaded.”
“Further, it is not possible for a recipient who is fully compliant in filing its return, to ensure that its suppliers are filing their returns on time. This may overburden genuine taxpayers with over-restrictive provisions of Section 16 especially in the MSME and SME sectors, she mentioned.”
Statutory Support for GST ITC
The tax expert mentioned that the same amendment shall make it essential for every assessee to avail the tax credit when the supplier reports a particular invoice in GSTR-1.
“Currently, a similar condition specified in delegated legislation is not taken seriously by numerous taxpayers on technical grounds, due to which non-compliance of this point is being litigated in several high courts. With this change, underlying restrictions on ITC will have statutory support, making the same invincible. Though this change is not a retrospective amendment in law, it is expected that the current litigation will be decided in favour of taxpayers, he added.”
