Communication of details of inward supplies and input tax credit

Section 38(1)

The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed.

AI Explanation

Registered individuals are required to provide information about the goods and services they sell, known as outward supplies, as per section 37(1). This includes both the specified supplies and any additional ones outlined by regulations.

Electronic Availability: The information about these supplies and a statement about the input tax credit will be electronically accessible to the recipients. This electronic provision aims to simplify the process for those receiving the supplies.

Form and Manner: The details will be presented in a specific form and manner, making it easier for recipients to understand and use the information effectively.

Timely Availability: This information will be made available within a designated time frame, ensuring that recipients receive it promptly and can manage their records efficiently.

Conditions and Restrictions: The availability of this information is subject to certain conditions and restrictions as outlined by the relevant regulations. These conditions are in place to ensure the accuracy and reliability of the provided details.

Section 38(2)

The auto-generated statement under sub-section (1) shall consist of

• (a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and

• (b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37,--

  • (i) by any registered person within such period of taking registration as may be prescribed; or

  • (ii) by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or

  • (iii) by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said sub-section during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or

  • (iv) by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed; or

  • (v) by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be prescribed; or

  • (vi) by such other class of persons as may be prescribed.

AI Explanation

1. Inward Supplies Eligible for Input Tax Credit:

   • The statement must include details of inward supplies where the recipient can claim input tax credit.

2. Supplies Not Eligible for Credit:

   • This part outlines supplies for which the recipient cannot avail credit, either wholly or partially. This restriction could be due to various reasons, as explained below.

Conditions for Credit Unavailability:

(i) Late Registration:

• If a registered person provides details of inward supplies after the prescribed registration period, the recipient may face limitations in claiming credit.

(ii) Tax Default:

• Registered individuals who default in tax payment for a specified period may be restricted from availing credit on certain supplies.

(iii) Output Tax Exceeds Payment:

• If the output tax payable during a prescribed period exceeds the tax paid by a registered person, limitations on credit availability may apply.

(iv) Excessive Input Tax Credit:

• A registered person who exceeds the prescribed limit for availing input tax credit may face restrictions.

(v) Default in Tax Liability:

• Individuals who default in discharging tax liability, as per the provisions of sub-section (12) of section 49, may be subject to conditions and restrictions regarding credit.

(vi) Other Prescribed Conditions:

• The auto-generated statement's restrictions may also apply to other classes of persons, as prescribed by relevant authorities.

Conclusion: In summary, recipients need to be aware of the conditions outlined in the auto-generated statement to effectively navigate tax compliance. Understanding when and why credit may be restricted is essential for businesses and individuals alike.