Form GSTR-1 vis-à-vis with 20% Eligible Input Rule – Is an entry with Form GSTR-1 evident that the supplier discharged tax in relation to his outward supply- Is 20% input Rule Applicable to SGST also?

[CA.Narendra.Kumar Thotamsetty]

GST-NK-Kt’Qs:  Form GSTR-1 vis-à-vis with 20% Eligible Input Rule – Is an entry with Form GSTR-1 evident that the supplier discharged tax in relation to his outward supply- Is 20% input Rule Applicable to SGST also? 

Query: Is an entry with Form GSTR-1 evident that the supplier discharged tax in relation to his outward supply? Or if such case, is the recipient still liable to pay tax jointly or severally in line with the supplier if the supplier not discharged tax but the recipient availed input on inward supply, though such entries appeared with his Form GSTR-2A? Is 20% on eligible input vis-à-vis of Form GSTR-2A read with CGST Notification No. 49/2019 – CT, dated 9th Oct 2019; applicable only to CGST Act & IGST Act and not with SGST Act? Is the recipient is supposed to forgo the eligible credit perpetually if his supplier not uploaded the returns in Form GSTR-1 even before of his filing of annual returns?

Answer: The Act of CGST is amended vide its rules vide Notification No 49/2019 – Central Tax, dated 9th Oct 2019; and  now the taxpayer is eligible to take “ELIGIBLE INPUT” subject to Form GSTR-2A.  Hence post amendment of the above CGST Rules, now the taxpayer is eligible to take such input not exceeding 20% of the Form GSTR -2A (i.e.; invoices or debit notes of the uploaded by the supplier in his Form GSTR-1 and reflected with Form GSTR-2A of the recipient).

Though one school of experts questioned the validity of the above rule as it is overriding Sec 43 of the CGST Act and object the concept of seem less credit; we are in the view that the rule introduced by the Government for the better tax compliance and to encourage the right business with the right people till the time that the new proviso 43A under CGST Act or SGST Act came into force.
 
However as above after introduction of the above new rule, now the taxpayer puzzled with the below quires. 

1.    Whether an entry with Form GSTR-1 is evident that the supplier discharged the tax in relation to his outward supply?

2.    If the supplier opted quarterly return in relation to his outward supply in Form GSTR-1, then in such case is the recipient has to forgo such credit till such date is the question?

3.    What if, if the supplier uploaded his outward supply with Form GSTR-1, then subsequently modified his entries with following returns without intimation to the recipient? If in the case whether the recipient has to monitor his past credits with his Form GSTR-2A and discharge interest is big question?

4.    Whether the above 20% eligible credit limit is applicable to only CGST Act or whether it’s applicable to SGST Act or IGST Act is question?

5.    Whether the recipient has to forgo such eligible credit if the supplier uploaded such returns off-late post September of the following year?
    
    The above questions not only put the taxpayers into puzzle, but it also complicated the simple returns under GST into science, where the science also moved into prediction, where the tax payer has to foresee his genuine supplier i.e.; the supplier who is filing returns in Form GSTR-1 on quarterly basis, and also puzzled with a magic that whether he need to take such credit or not; or if he take such credit that his prediction may go wrong with payment of interest @24%, if such supplier not filed the returns within the due date. 

    Further post introduction of the above 20% rule, its complicated the business of the small taxpayers, where the recipient may force such suppliers to go with monthly return in Form GSTR-1, but the common portal may not allow the taxpayer to opt the returns on monthly basis during the mid of the year if such taxpayer already opted such returns on quarterly basis.

    With reference to eligible credit under the IGST Act, CGST, SGST Act though we are in the opinion the Act of GST is unique across PAN India Basis, but the 20% rule is applicable to only to the CGST Credit and IGST Credit, since till the date many states not amended their rules with reference to 20% eligible credit, though such rules are unique with reference to each state and made taxpayer force to compute his workings accordingly with reference to IGST Act,  CGST Act and SGST Act.

    Further considering the restriction of the input vis-à-vis with annual return, it’s highly advisable the taxpayer to take input with Form GSTR-3B as per his workings by ignoring 20% rule and reverse such excess credit considering the 20% of the above rule; and which makes the taxpayer to keep intact of such credit perpetually if his supplier files his returns in Form GSTR-1 off-late i.e.; post Sept of the following year; and it also absolves the payment of interest  of such credit since the taxpayer availed and reversed such credit in the same return in the Form GSTR-3B.

    However at the same time with reference to Compliance Rating under Sec 149 of the CGST/SGST Act, we are in the opinion if the Government introduced the compliance rating at the staggered manner; that is at least with reference to outward supply vis-à-vis with Form GSTR-3B Vs Form GSTR-1 and in relation to non-filers, then its benefitted large number of taxpayers, where both taxpayers and department can unearth such transactions not reported with the GST common portal and make inform decisions accordingly. 

    The information in the above Kt’Qs dated 9th Nov 2019 provided on advisory and education purpose only and the reader of this info are highly advised to proceed with detailed further analysis before relaying the above Kt’Qs. 

Best Regards,
CA Narendra Kumar Thotamsetty
Hand Phone - +91-99163-22238
Hyderabad

Discussions to this article

[niranjan gupta]

According to my view, this circular has been issued in GST and not in any particular Act. So it applies to all the Acts.

[KASTURI SETHI]

The 'capping' is not a wise step by Govt. Receiver (without fault) is being penalised instead of supplier for not uploading invoices in time. However, it is a moral booster for professionals ! Such steps will generate work for professionals !!

[niranjan gupta]

According to the calculation carried by various method, its not restricted the credit except one or instances.

In fact, if we interpret rule this method allow 20% more credit whatever is given in 2A.

Further, is this rule applicable? Section 43A of the CGST Act which is specific to this is not notified. Hence, the rule is also not applicable as on date.