It is necessary to be very careful about taxation in GST

- Sales Tax : Soham Mashruwala

Not all tax credits are recoverable under the GST law. As the law is amended in the matter of tax credit, suffering tax credit is like chewing iron gram. Under Section 16 of the GST Act, a substantial provision has been made and Rule 36 has been framed accordingly. It is further provided that the recipient cannot avail the tax credit unless the correct details are shown in the supplier's GSTR 1 which results in the details appearing in the recipient's GSTR2B. Today's article discusses such an unfair provision regarding tax credits.

Situation before 1.10.2019

When the GST law came in, it was suggested to fill the form that until the information of GSTR 2 filled by the supplier is obtained with the information of GSTR1, the recipient will not be able to take his tax credit in the GSTR3 form. Because of this, there was no provision in Section 16 that tax would not be payable unless the transaction was shown in the books. GSTR2A was information only form and GSRT3B was to be filled instead of GSTR3. Due to this, even if a transaction does not appear in GSTR2A for the period prior to 1.10.2019, if the recipient has proof from the supplier that the tax has been paid, the tax credit is available. Thus, if the bill does not appear in GSTR2A only or if it appears after the time limit, then the tax credit cannot be considered canceled for the transaction dated 1.10.2019.

Dangerous amendments in Rule 36(4) and Section 16

Notification no. 49/2019 under the Central Tax Rule 36(4) has been born which provides that as many bills as appear in GSTR2A, tax credit is available at 110% of the article. This limit has been reduced to 105% and today there is a provision that only as many bills as appear in GSTR2B are eligible for tax credit. Section 16(2)(aa) was brought in to give some support to such a provision under Section 16. Interpreting Article 16 and Rule 36 clearly determines that. It is imperative that the recipient has proof that the tax has been paid by the supplier. So that the arbitrator is not present at the time of assessment. The judgment of the Supreme Court in Arise India Limited, however, the provisions of Article 16 and Rule 36(4) seem to be baseless. The recipient cannot be penalized without taking any action against the supplier and the first recovery should be from the tax collector. Many times the supplier fills GSTR1 blank and then does not fill GSTR3B and GST portal does not allow such supplier to fill the form. Thus, all the forms should be filled equally for undisputed situation. The provision of Rule 36(4) should be declared unconstitutional.