QUESTION
 

During audit conducted by Central Tax Audit for the period of 2017-18 & 2018-19 , Audit department found some GST Mismatches which were not uploaded by the suppliers (some of the suppliers are PSUs) and decided to disallow the input tax credit. We claimed the GST input based on the tax invoices, as it was not mandatory to caim the input tax credit as per GSTR2A at the initial periods of GST implementation. Please advise how to defend it and prove our claim valid.  

ANSWER 
 

Facts of the case:  Whether GST input can be claimed on the basis of Purchase invoices, as it was not mandatory to claim ITC as per GSTR-2A in the initial periods of GST implementation.

Law Applicable: SECTION 16 OF CGST ACT

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,''

a)      he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

b)      he has received the goods or services or both.-------------------------------------

c)      'subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

d)     he has furnished the return under section 39:

CGST RULE 36 (wef 09.10.2019)

(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 10 percent (20 per cent till 01.01.2020) of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37. 

Interpretation: There is no provision which makes ITC not reflected in GSTR-2A as ineligible nor it is one of the mandatory conditions to avail ITC in terms of Section 16 of the CGST Act. 

However wef 09.10.2019 Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers in GSTR-1 shall not exceed 10 percent (20 per cent till 01.01.2020) of the eligible credit available.

Hence ITC claimed on the basis of tax invoices cannot be disallowed for the period before amendment in Rule 36(4) on the grounds that same was not reflecting in GSTR-2A, thereafter as per Rule 36(4) for invoices not reflecting in GSTR-2A,  ITC can be claimed 10% on provisional basis.

Conclusion: You can go for litigation for disallowance of ITC claimed on the basis of tax invoices and not reflecting in GSTR-2A  till 09.10.2019. (Reply dt.30.12.2020)