Is Blocking of ITC on Non-Filing of GSTR-3B by Supplier Correct??
The government has inserted Rule 86A in the CGST Rules, 2017 vide Notification No. 75/2019- Central Tax dated 26.12.2019
This rule lays down the conditions for availment of Input Tax Credit (ITC) by a taxpayer. One of the condition prescribed in this rule states that “ITC will not be available on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government.”
It means if a supplier has not filed his GSTR-3B return then corresponding ITC will not be available to the buyer as per Rule 86A of the CGST Rules, 2017.
Now let’s try to find answer of these questions :
(1.) When the buyer has paid GST tax to the supplier then why he is restricted to avail the ITC?
(2.) Section 16(2) of the CGST Act, 2017 states that if the buyer is in possession of tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed, then he can claim ITC. But Rule 86A is restricting him to avail ITC if the said supplier has not paid tax in his GSTR-3B return.
So, here it is interesting to note that this is against Article 265 of the Constitution of India and the basic legal principle that “Rules and Circulars can not override Act”
(3.) On one side they made the law that if the invoice raised by the supplier is available in GSTR-2A of the buyer then the buyer can take ITC of that invoice but on another side, they are talking about GSTR-3B. Is it not controversial?
In support of above 2 questions, I am sharing the judgement provided by the Gujarat High Court in the case of M/s Kalpsutra Gujarat versus The Union of India. The extract of judgement is as under :
“We would like to understand from the respondents whether the omission on the part of the third party (Seller) in filing the GSTR-3B for the relevant period would be sufficient to block the Input Tax Credit of the writ applicant. We would also like to understand whether for such action, the Department has invoked Rule 86A of the Central Goods and Services Tax Rules, 2017.“
Conclusion : From the above discussion and HC judgement, we can understand that Rule 86A can not restrict a buyer from taking ITC even if the supplier has not paid tax in his GSTR-3B return, unless any action is mala-fide in nature.
Thanks for reading my thoughts on “Is Blocking of ITC on Non-Filing of GSTR-3B by Supplier Correct??”
The author is Dhanraj Sharma and he can be reached at dhanrajca66@gmail.com
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I agree