As per the sub-rule (4) inserted in rule 36 of the CGST Rules, 2017, a taxpayer filing GSTR-3B can claim provisional Input Tax Credit (ITC) only to the extent of 10% of the eligible credit available in GSTR-2A. The amount of eligible credit is arrived upon those invoices or debit notes, the details of which have been uploaded by the suppliers in the GSTR-2A only. The 10% limit applies from 1 Jan 2020 onwards only. The ITC claim was earlier restricted to 20% for the period from 9th Oct 2019 till 31st Dec 2019.
Since introduction of above Rule it has been a subject matter of deliberation that such Rule is harsh on the recipients and is ultra virus considering that such restriction could have been prescribed under Section 43A of the CGST Act,2017 which has not yet been notified. Although Rule 36(4) has been inserted by invoking Section 164 of the CGST Act,2017 which is an omnibus section, empowering the Government to make Rules for any matters under the GST Act.
Needless to mention here that vide notification No. 30/2020- Central Tax, dated 03.04.2020, a proviso has been inserted in CGST Rules 2017 to provide that the said restriction to Rule 36(4) shall not apply to ITC availed by the registered persons in the returns in FORM GSTR-3B for the months of February, March, April, May, June, July and August, 2020, but that the said condition shall apply cumulatively for the said period and that the return in FORM GSTR-3B for the tax period of September, 2020 shall be furnished with cumulative adjustment of ITC for the said months in accordance with the condition under rule 36(4).
Rule 36(4) challanged before Rajasthan High Court:
M/s Gr Infraprojects Ltd had challenged the Rule 36(4) through a writ before the Rajasthan High Court. The petitioner submitted that introduction of sub-rule(4) to Rule 36 is ultra vires to Sections 38(1) and 42(3) of the CGST Act and RGST Act.
It is pertinent to mention here that Section 38(1) is in respect of filing of details of inward supplies (GSTR-2) and Section 42(3) is regarding communication of discrepancy between GSTR-1 filed by supplier and GSTR-2 filed by recipient.
Rajasthan High Court issues notice to Central Govt:
On the writ filed the Rajasthan High Court has issued notice to the Central Government, returnable within six weeks and matter is now listed for hearing on 16.09.2020.
The order of Rajasthan High Court is as under:-
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