Overview

1. The whole world is gasping due to the spread of Novel Corona Virus [“COVID – 19”] and has come to a grinding halt. The story is no different in India, wherein the threat is so severe that it has not only impacted the lives of the people but has also ensured that the business, commerce and industry remain standstill.
2. In this background, the Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman vide Press Release dated 24.03.2020 announced several important relief measures, especially on statutory and regulatory compliance matters related to several sectors, in view of COVID-19 outbreak.
3. Now in continuation of the aforesaid initiative and to ensure ease of doing business during these trying times, the Government of India has further relaxed the difficulty faced by the taxpayers (service provides, traders as also manufacturers) with respect to availing of Input Tax Credit [“ITC”] under the Goods and Service Tax [“GST”] law.
4. The Government earlier in order to curb the fake availment of ITC by certain unscrupulous registered persons has issued Notification No. 49/2019 – Central Tax dated 09.10.2019 vide which a new sub-rule (4) to Rule 36 of the Central Goods and Services Tax Rules, 2017 [“CGST Rules”] has been inserted. As per the inserted sub-rule (4) to Rule 36, a registered person can avail the ITC only upto 20% [subsequently it was reduced to 10%] of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded, as regards the invoices or debit notes which are not uploaded by the supplier with its Form GSTR-01. In simple words, 100% ITC was made available for invoices / debit notes uploaded (say ‘X’) by an assessee. As regards the invoices / debit notes which are not uploaded, the ITC was restricted to 10% of the compliant invoices / debit notes i.e. 10% of ‘X’. The relevant Rule 36(4) of CGST Rules is extracted below for ease of reference:

“(4) Input tax credit to be availed by a registered person 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 10 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37”. 

1. In this regard, now the Central Board of Indirect Taxes and Customs [“CBIC”] vide Notification No. 30/2020 – Central Tax dated 03.04.2020 has temporarily lifted the restriction of availing the ITC upto 10 per cent (for February to August period) as imposed on the assesses. This temporary relaxation has been given in view of the prevailing COVID-19 situation.
2. Vide the said Notification a new proviso to sub-rule (4) of Rule 36 of CGST Rules has been inserted, which is extracted below for ease of reference:

“Provided that the said condition shall apply cumulatively for the period February, March, April, May, June, July and August, 2020 and the return in FORM GSTR-3B for the tax period September, 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months in accordance with the condition above.” 

1. From the above, it can be construed that now the assessees will be able to claim full ITC even for those supplies, in respect of which the invoices/debit notes have not been uploaded by their suppliers for the period February to August, 2020.
2. Further, the CBIC vide Circular No. 136/06/2020-GST dated 03.04.2020 has clarified that the above condition 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. However, the said condition shall apply cumulatively for the said period. That the return in Form GSTR-3B for the aforesaid tax period ending in September, 2020, shall be furnished with cumulative adjustment of ITC for the said months, in accordance with the main condition under rule 36(4).
3. In simple terms, the ITC as per books can be claimed without considering the credit as per GSTR- 2A for the period February 2020 to August 2020 only. However, the ITC claimed has to be reconciled as per Rule 36(4) in a consolidated manner with GSTR – 2A before filing the Form GSTR- 3B for the month of September 2020.
4. We can say that in view of this move of the Government, now the assessee will be able to utilize the full ITC against the payment of output tax [earlier which was being paid through the working capital, in respect of those suppliers who were not uploading the invoices / debit notes in time]. Although the restriction is transient in nature, however, it will help organisations in the present scenario of COVID – 19 pandemic to manage their working capital a little better.