Impact of Rule 37AAkash Phophalia

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The Tax Publishers GST--Input Tax Credit Impact of Rule 37A Akash Phophalia Rule 37A of the CGST Rules deals with reversal of input tax credit in the case of non-payment of tax by the supplier and re-availment thereof. The provisions of this Rule and its impact on business are discussed by the Learned Author in this write up. 1. Introduction Seamless flow of input tax credit had led businessman excited about admissibility of all input tax credits of tax paid on inward supplies but the said concept seems not liked by the law makers and, therefore, they are in consistent efforts to curtail the input tax credit available to the buyers even when the fault lies with the suppliers. One of the glorious examples is rule 37A of the Central Goods and Services Rules, 2017. 2. Background GST law specifies the flow of filing of returns so as to ensure verification of uploading of all the invoices issued and ensure payment of taxes against the said invoices by the supplier of himself. In its process, it introduced GSTR-1(details of outward supplies), GSTR-2 (details of inward supplies) and GSTR-3 (monthly return) as returns to be filed by registered taxable persons. In case of any discrepancy in GSTR-1 and GSTR-2, the same could be corrected by GSTR-1A and GSTR-2A thereby leading to a proper filing of GSTR-3. By this mechanism, they could have ensured correct disclosure of all liabilities in GSTR-3 and the tax could be correctly collected from the person liable to pay taxes. However, due to unforeseen reasons, GSTR-2 and GSTR-3 did not find their existence and the form GSTR-3B which was introduced for intervening period of two months, found its permanent existence in the system. However, this led to a serious problem of absence of mechanism to identify whether the supplier had discharged its liability towards invoices uploaded in GSTR-1 and thereby leading to absence of mechanism to ensure compliance of condition mentioned in section 16(2)(c). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Input Tax Credit

Impact of Rule 37A

Akash Phophalia

Rule 37A of the CGST Rules deals with reversal of input tax credit in the case of non-payment of tax by the supplier and re-availment thereof. The provisions of this Rule and its impact on business are discussed by the Learned Author in this write up.

1. Introduction

Seamless flow of input tax credit had led businessman excited about admissibility of all input tax credits of tax paid on inward supplies but the said concept seems not liked by the law makers and, therefore, they are in consistent efforts to curtail the input tax credit available to the buyers even when the fault lies with the suppliers. One of the glorious examples is rule 37A of the Central Goods and Services Rules, 2017.

2. Background

GST law specifies the flow of filing of returns so as to ensure verification of uploading of all the invoices issued and ensure payment of taxes against the said invoices by the supplier of himself. In its process, it introduced GSTR-1(details of outward supplies), GSTR-2 (details of inward supplies) and GSTR-3 (monthly return) as returns to be filed by registered taxable persons. In case of any discrepancy in GSTR-1 and GSTR-2, the same could be corrected by GSTR-1A and GSTR-2A thereby leading to a proper filing of GSTR-3. By this mechanism, they could have ensured correct disclosure of all liabilities in GSTR-3 and the tax could be correctly collected from the person liable to pay taxes. However, due to unforeseen reasons, GSTR-2 and GSTR-3 did not find their existence and the form GSTR-3B which was introduced for intervening period of two months, found its permanent existence in the system. However, this led to a serious problem of absence of mechanism to identify whether the supplier had discharged its liability towards invoices uploaded in GSTR-1 and thereby leading to absence of mechanism to ensure compliance of condition mentioned in section 16(2)(c).