One of the fundamental reasons for the implementation of GST was the seamless flow of input tax credits. However, ironically, availment and utilization of input tax credit has become a painful task for the taxpayer under GST. ITC Reversal as per Rule 37A article briefly speaks on its applicability, re-availment of ITC.
In order to get entitled to credit of any input tax, the taxpayer needs to satisfy all the conditions as prescribed under section 16(2) of the CGST, 2017 and the rules made thereunder.
Notably, as prescribed under section 16(2)(c), input tax credit (ITC) can be availed only if the required tax is paid by the supplier to the Government. Correspondingly, rule 37A of the CGST 2017 deals with the mechanism of ITC reversal in case of non-payment of tax by the supplier and subsequent re-availment of the same.
Vide the present article, let us clear up all the provisions associated with ITC reversals and re-availment on account of rule 37A of the CGST 2017.
ITC Reversal as per Rule 37A| Insertion And Applicability
Rule 37A was inserted vide notification no. 26/2022- Central Tax dated 26th December 2022. Applicability of the rule depends on the below-mentioned circumstances
Applicability of rule 37A of the CGST Rules is more simplified
Relevant person | Relevant return | Details |
|---|---|---|
Recipient | Form GSTR-3B | ITC on invoice/ debit note is availed by the recipient in Form GSTR-3B |
Supplier | Form GSTR-1B or IFF | Details of invoice/debit note are furnished by the supplier in Form GSTR-1 or IFF |
Supplier | Form GSTR-3B | The supplier has failed to furnish the return in Form GSTR-3B, covering invoice/ debit note and the return is not furnished till 30th September following the end of the financial year in which ITC was availed by the recipient. |
In a nutshell, provisions of rule 37A are applicable as and when the supplier has reflected the invoice/ debit note in GSTR-1. However, the corresponding tax on the said invoice/ debit note is not paid to the Government via GSTR-3B.
ITC Reversal as per Rule 37A of the CGST, 2017
As and when provisions of rule 37A become applicable, the taxpayer needs to take any of the following actions
Perticular | Action |
|---|---|
ITC reversal on or before 30th November | Reverse ITC on or before 30th November following the end of the financial year in which ITC is availed. Interest will not be payable for ITC reversed on or before 30th November. |
ITC reversal after 30th November | Reverse ITC after 30th November following the end of the financial year in which ITC is availed. Additionally, the taxpayer will be liable to pay interest under section 50 of the Central Goods and Services Tax Act, 2017. |
Re-availment of ITC
As per the second proviso to rule 37A, the reversed ITC can be re-availed by the recipient as and when the supplier furnishes the return in Form GSTR-3B for the said tax period.
Thus, once the pending tax on the respective invoice/debit note is deposited by the supplier, ITC on the same can be availed by the recipient.
ITC reversal and Re-Availment under rule 37A
ITC Reversal as per Rule 37A under GST
- ITC is to be reversed by the recipient when all the following circumstances are satisfied
- The recipient has availed ITC on invoice/ debit note in GSTR-3B;
- Details of the said invoice/ debit note are furnished by the supplier in GSTR-1 or IFF in GST;
- Supplier has not furnished GSTR-3B of the relevant tax period i.e. tax is not deposited by the supplier to the Government.
ITC re-availment under rule 37A
- ITC can be re-availed by the recipient, on furnishing of GSTR-3B return by the supplier.
Claim upto 100% Input Tax Credit
Easiest GSTR 2B Reconciliation With Reverse ERP Integration