Another restriction proposed under Section 38 is to restrict credit in the hands of the recipient if the GST payable as per GSTR-1 of its supplier exceeds the tax paid in GSTR-3B by the supplier beyond permissible limits. GSTR-3B is a summary document and does not allow for invoice-wise bifurcation of the payment. The supplier may have paid some liabilities (including the supply to the relevant recipient) but not others or may have paid part of liability on the supply to the recipient. However, on a strict reading of Section 38, if the supplier has defaulted, none of his recipients would be able to take credit.
Further, a pertinent question that arises is regarding availment of credit in case of payment of tax under reverse charge or on imports. Presently, Section 16(2)(ba) categorially allows credit only in cases where the details of input tax have been communicated and not restricted under Section 38. This would entail that credit where no such details are communicated is automatically disallowed to the recipient. Notably, the prescribed statement for communicating these details, namely GSTR-2B, does not include self-invoices for reverse charge. A recipient is statutorily required to raise self-invoices in case of reverse charge supplies received from unregistered suppliers/foreign suppliers.
Further, even though GSTR-2B has a facility to provide details of bills of entry filed by the recipient within the tax period, it has been the practical experience of many taxpayers that the list of bills of entry is often incomplete. One may contend that the provision has to be read down to this extent to allow for credit of such procurements. However, this does not prevent litigation due to mismatch between GSTR-2B and GSTR-3B credits.
Source: Barandbench
