Revised Section 38 of the CGST Act Proposed by Finance Bill 2022

Only because ITC is showing in GSTR-2B does not means that taxpayer is eligible to take it’s ITC. If ITC is not allowed due to any other provisions of the GST Act or GST rules then such ITC should not be taken in GSTR-3B. For example, blocked credits in Section 17(5) or ITC not allowed as per Sec. 16

By amending Sec. 16 and Sec. 38of the CGST Act through its Finance Bill 2022,The Finance bill now fully ready to increase the taxpayer's burden.

Section 16 Subsection 2 Clause (ba) is the recently added condition allows you to avail input tax credit with respect to a supply may only be claimed if it has not been restricted under section 38. This means that it is the recipient's responsibility to ensure that the input tax credit claimed cannot be restricted by the provisions of section 38 of the Act.

Section 38. Communication of details of inward supplies and input tax credit. When it comes to claiming the input tax credit, Sec. 38 has never been in the taxpayer's favour.

Sec. 38 Sub sec.(2) has two parts clause (a) and clause (b) So, let’s know about this section clause-by-clause.

Clause (a) details of inward supplies in respect of which credit of input tax may be available to the recipient; In other words, eligible ITC.

and

Clause (b) Inward supplies provided by the supplier in the GSTR-2B in respect of which such credit cannot be availed, or ineligible ITC. There are six parts in this clause.

             (i) ITC may not be claimed on supplies provided by the newly registered supplier within the prescribed period; or

         (ii) We can't claim ITC if supplier has not paid their tax and where such default has continued for such period as may be prescribed; or

      (iii) Input tax cannot be claimed for any purchases where the supplier's tax liability exceeds the amount of tax actually paid during the specified period and within the allowed limit. For example If GSTR-1 liability is greater than GSTR-3B that means tax liability higher than tax paid in 3B.  or

            (iv) ITC may not be availed if supplier take ITC but not follow above mentioned ITC Act as per Sec. 16 (2) clause (a) in other words supplier not follow elegible ITC  Act. or

           

           (v) ITC cannot be used for goods or services provided by a supplier that hasn't paid their tax obligation in accordance with Section 49(12), subject to such conditions and restrictions as may be prescribed; or

          (vi) ITC may not be claim by such other class of persons as may be prescribed.]

However, the beneficiary would obviously have a problem as soon as this newly revised clause and its rules go into effect.

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