Rule 36 and Amendments to Rule 36 Sub Rule 4 Explained

What is Rule 36 of CGST Rules 2017?

Rule 36 is very important for all GST Registrants. It specifies the documentary evidence that should be in your possession and other mandatory conditions to be satisfied to claim ITC on Purchases.

Rule 4

On 22.12.20 (Applicable from 01.01.2021) another significant amendment was brought in Rule 4 wherein the Registered Applicant is restricted to claim ITC on Purchases which are not reflecting in GSTR 2A/2B.The ITC claim for such purchases cannot exceed 5% of the ITC reflecting in GSTR2A/2B.

For example XYZ Enterprises has made purchases of Rs 10 lacs for the month of January’21 on which IGST paid was Rs 1,80,000. When he downloads his GSTR 2B for January the purchases reflected therein are of Rs 6,00,000 , IGST paid is Rs 1,08,000.

Following the provisions of Rule 4 XYZ Enterprises eligible ITC claim for January ’21 cannot exceed Rs 1,13,400
1) ITC as per 2A	Rs 1,08,000
2) Plus 5% of 1	Rs 5,400
Total Claimable ITC	Rs 1,13,400
Total Claimable ITC	Rs 66,600

The Blocked ITC can be claimed in subsequent months again depending on it’s reflection in GSTR 2A/2B

TaxPlanet Tips

As Blocked ITC will effect your working capital requirements it is very important for the registered applicant to take steps to reduce it’s Blocked ITC

This can be done by

dealing with suppliers who are file their GST Returns accurately and timely

reconciling the monthly purchases with GSTR 2A/2B and rigorously following up with suppliers whose purchases are not reflecting in GSTR 2A

Rule 1

Documentary Evidence for Claim of ITC– Basically the Claim of ITC should be supported by an Invoice or Credit Note

An Invoice issued by the supplier in accordance with Provisions of Section 31
An Invoice issued as per the Provisions of Clause f of Section 31(3) , subject to payment of Tax
A debit note issued by the supplier in accordance with Provisions of Section 34
A bill of entry or similar document mentioned under the Customs Act 1962 or rules made therein for assessment of IGST on Imports
An Input Service Distributor Invoice or Credit Note as per the provisions of Rule 54(1)

Rule 2

This Rule mentions the details that should be specified in the Invoice / Credit Note

Details of the amount of Tax Charged
Description of goods and services
Total value of supply of goods or services or both
GSTIN of supplier and recipient
Place of supply in case of inter state supply

Rule 3

This Rule mentions the details that should be specified in the Invoice / Credit Note

No ITC can be claimed by a registered person is respect of any tax that has been paid in pursuant of an order where any demand has been confirmed on account of fraud, willful misstatement or suppression of facts