Steps to ensure compliance with Rule 36(4) in GST : Practical way to deal with ITC restriction of 20%


Steps to ensure compliance with Rule 36(4) in GST : Practical way to deal with ITC restriction of 20%

CBIC by way of Notification No. 49/2019 – Central Tax dated 9th October 2019 has notified yet another round of amendments to the CGST Rules which may have far reaching implications for the trade and industry both from the point of view of increased burden of compliances and financial hit that the companies may now be forced to take on account of blocked miss-matched input tax credits.

Thus, Rule 36(4) aims to limit the availment of ITC by the recipient in respect of invoices/debit notes, details of which have not been uploaded by the supplier in its FORM GSTR-1 filed under Section 37(1) of the CGST Act, 2017.

The business can take to ensure reasonable compliance with said rule by following sequential steps:

  1. From the input tax credit taken as per books deduct the Blocked credit u/s 17(5)
  2. Remove those invoice in respect of GSTR-1 is required to be filed by the buyer. For example, IGST on import of Goods, ISD Credit, and tax paid under reverse charge etc and denote it as Books of Accounts ITC.
  3. Reconcile the invoices of the step -2 with entries in Form GSTR -2A to identify the invoices of eligible crediting respect of which the supplier has not uploaded details in GSTR – 1 and mark this as Pending Invoice.
  4. If possible, identify the invoices pertaining to quarterly return and mark them as Quarterly invoices.
  5. Calculate Available ITC = Books of Account ITC-Pending Invoice + Quarterly Invoice
  6. Eligible Credit =Available credit+20%of Available credit.

So in this way business can work out the rules that has been imposed and apply them with ease, but because of which cost of compliance will be more.


Business should start identifying suppliers not uploading invoices in their Form GSTR -1 and follow for compliance which will also ensure that the availing of credit is done easily.