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Draft Reply – Rule 36(4) CGST Rules by Madhukar Hiregenge Sir

The Assistant/ Deputy Commissioner (State Tax),
ABC Circle,
1st Floor,
XYZ Block,
Bangalore -530 003
Dear Sir,
Sub: Reply to the advisory e-mail received for the reversal of ITC in excess of the credit admissible under rule 36(4) – Reg.
Ref: 1. E-mail dated 24.01.2020 with no reference number.
2. GST Registration No. 89abcdg….

1. We M/s. HA Ltd. having GSTN referred above are engaged in the business of processing and job work in the auto industry.

2. We have received an e-mail communication from “My GST <>” stating that we have availed excess ITC of Rs. 19,16,0,629/- which is more than credit admissible under Rule 36(4) of the CGST Rules, 2017 for the month of November 2019.

3. One of our consultants is exclusively allocated for this purpose for doing this reconciliation of ITC between books of accounts & GSTR-2A in GSTN Portal. His job is to follow up with vendors for the continuous filing of GSTR-1 Returns. We are behind our vendors for filing the GSTR-1 returns from their end. However, we cannot write up their accounts and comply with them. This is an additional cost of doing business under GST.

4. As per your e-mail, there is an excess credit availed. However, we are not having a detailed bifurcation for this amount. In spite of this, we have also made a special effort ( with special cost) and attempted to reconcile the differences between input tax credit as per books and GSTR-2A but could not arrive at the above figure.

5. We need the detailed breakup of bifurcation for the above differential amount to explain the differences, in the absence of which it could be difficult for us to verify and provide a reply to your e-mail.

6. As per Section 37 of the CGST Act, 2017 a registered supplier can upload/ modify the invoices relating to a particular financial year till the due date of filing the return of September of the subsequent financial year or furnishing of annual return whichever is earlier.

7. Therefore, the suppliers are having ample time to file their GSTR-1s for the financial year 2019-20. We are constantly making our honest efforts, we are behind our vendors & demanding them for filing the GSTR-1.

8. Rule 36(4) of CGST, Rules 2017 per se does not provide for a specific date on which the status of eligible ITC uploaded by the suppliers in GSTR-1 is to be seen to derive the permissible ITC. It only provides that the availment of ITC would be conditional upon the reflection of the concerned transactions in due course with 20% tolerance.

9. Hence if the concerned transactions on which ITC has been availed are eventually reflected by the last date for reporting or correcting any transactions in GSTR-1(i.e. 20th October of the subsequent financial year), ITC cannot be restricted. So by the time of filing GSTR-9 & GSTR-9C, we can try to ensure that all our vendors file their GSTR-1 so that all entries could be there in GSTR-2A.

10. We wish to bring your attention to Delhi High Court judgment in the case of Arise India Limited and Ors. v. Commissioner of Trade and Taxes (MANU/DE/3361/2017) in the context of restrictions on availing of VAT credit on the failure of the seller to pay the tax held that the said restrictions violate Article 14 of the Constitution of India which grants equality before the law. Moreover, Departmental Special Leave Petition No. 36750/2017 against the above order was also dismissed by the Hon’ble Supreme court upholding the order of Delhi High Court.

11. We wish to bring to your notice the circular No.128/27/2019 dated 23.12.2019 which states that every communication including e-mails from the CBIC should have a Document Identification Number (DIN), in the absence of which it would be considered as invalid communication/notice. Thereby since there is no DIN assigned to this E-Mail communication, it can be considered invalid and not requiring us to respond. This is what we understood in the TV shows where Honourable FM has clarified. Kindly let us know if what we are saying is incorrect. We will stand corrected.

12. Further, we wish to communicate that many of our vendors are filing the quarterly GSTR-1. To that extent, transactions will be reflected in GSTR-2A after the end of the quarter, so entries in GSTR-2A with credit in GSTR-3B will not be tallied.

13. Lastly, it may be impossible to ensure all our vendors comply as then we need to stop all processing activities and allocate resources from production and marketing to get the vendors who number 500+ to comply. It is unfair to ask us to do the impossible.

However, as tax-compliant processors, we shall be glad to furnish any reasonable further information/clarification required in this regard within our control.

Kindly consider the above information and either do not initiate any further proceedings till October 2020 or drop further proceedings in this regard.

Kindly acknowledge the receipt of this letter.

Thanking you,
Yours truly,
For M/s. HA Ltd.

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