GST 5% ITC Rule: Central Board of Indirect Taxes & Customs (CBIC) released Notification No. 39/2021–Central Tax dated on 21st December 2021 which notifies the date 1st Jan 2022 from which provisions of Section 108, 109, and 113 to 122 of the said Act shall come into force.
As per Section 109 of the Finance Act, 2021, Amendment in Section 16 is done by inserting clause (aa) after section 16(2)(a), namely-
“(aa) 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;”.
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Earlier, CBIC inserted sub-rule (4) under Rule 36 of the CGST Rules, 2017. The rule states that the provisional tax credit (without invoices on GSTR-2B) can be claimed in the GSTR-3B to the extent of 5% of eligible ITC reflected in the GSTR-2B.
Section 37 contains the details to be submitted for outward supplies in GSTR-1 . Therefore, from 1st January 2022, ITC can be claimed only in relation to invoices or debit note furnished by supplier in GSTR-1. There will be no additional facility of GST 5% ITC for invoices not reflected in GSTR-1 as earlier and it will also rest disputed validity of Rule 36(4).
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With effect from 1st Jan 2021, the total ITC that can be claimed in GSTR-3B is 105% of the eligible ITC appearing in the GSTR-2B of a particular period. The circular 123/2019 clarifying the issues relating to the implementation of original rule 36(4) was released on 11th November 2019.
However, it was earlier restricted to 20% for the period from 9th Oct 2019 up to 31st Dec 2019 while 10% between 1st Jan 2020 and 31st Dec 2020.
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