1) 'Eligible' Credit: The calculation of ITC available to the taxpayer is to be determined based on the 'Eligible Credit'. The newly introduced Rule 36(4) uses the term 'eligible credit' which is neither defined in GST Act nor in the rules made thereunder. Given this, the basic criteria of computation remains unknown to the taxpayers.
2) Tax not deposited by the supplier: As per Section 16(2) of CGST Act, a recipient can avail the ITC if the supplier has paid the tax charged in the invoice/ debit note. It is pertinent to note that mere uploading the details in GSTR-1 is no evidence that the supplier has paid the taxes charged by him. Given this, whether a recipient is also required to check whether the taxes are paid by the supplier and whether he has filed his GSTR-3B.
3) Time limit for availing the credit: The last date of availment of credit is provided in Section 16(4) of CGST Act, 2017. As per the said sub-section, a registered person can avail ITC upto the date of filing of return for the month of September following the end of the financial year to which such invoice or debit note relating to such invoice pertains, or the date of filing annual return, whichever is earlier. It is pertinent to note that the newly introduced sub-rule debars a person from availing the credit itself. In other words, the restriction is not on utilisation of credit but on the availment of credit itself.
Section 38 of CGST Act read with Rule 60 of CGST Rules enabled the taxpayers to avail the credit in respect of missing invoices by furnishing the details of the same in Form GSTR-2. However, the Rule 36(4) amplifies the difficulties for availing the credit by neither allowing to furnish/ report the details of missing invoices nor allowing to avail the credit.
4) Periodicity for the purpose of computation: The Rule is silent on the periodicity for which the eligible credit should be considered. In other words, whether the computation should be made considering the invoices reported and unreported during a period or on cumulative basis i.e. including the reported and unreported invoices of past period/ months as well.
5) Gross/ Net Credit: The rule requires the computation to be based on the total eligible credit, however, the rule is unclear about the inclusion/ exclusion of credit notes issued by the suppliers which may or may not be reported. Further, there may be a scenario wherein the credit note is reported by the supplier, however, the same is not received and booked by the recipient.
Further, the computation would be more complicated in the case where the supplier is engaged in providing taxable and exempted supplies and the total ITC availed is subject to reversal under Section 17(2) of CGST Act read with Rule 42 and Rule 43 of CGST Rules.
Also, the taxpayer may be required to reverse the ITC if the payment is not made within 180 days. Given this, the question arises whether the computation of 'eligible credit' should be inclusive or exclusive of the credit reversal required on this account. It is also not clear whether a taxpayer should include the reported invoices/ debit notes, the credit in respect of which is specifically disallowed by Section 17(5) of CGST Act.
It is also worth evaluating whether to include the invoice/ debit note, for the purpose of computing the cap of 20%, the details of which are uploaded by the supplier, however, the conditions of section 16(2) of CGST Act are not met on the date of filing of return.
6) Frequently changing GSTR-2A: It is a known fact that GSTR-2A keeps on getting updated every time the detail is reported/ removed by the supplier from his GSTR-1. Given this, it would be difficult for the taxpayers to keep track of the invoices appearing in GSTR-2A and also substantiating the working made for availing the credit during the assessments and audits.
7) Supplies liable to GST under RCM: A registered taxpayer whose supplies are liable to GST under reverse charge mechanism ('RCM') is required to issue the tax invoice and furnish the details of the same in his GSTR-1. Given this, the question arises whether such invoice uploaded by the supplier should also be included for computing the capping of 20% under Rule 36(4) of CGST Rules.
8) ITC disallowed during the audit/ assessment: The dispute between the tax authorities and the taxpayers with respect to eligibility of ITC is well known to everyone. The computation of 20% of total ITC eligible to the taxpayer in respect of unreported invoices/ debit notes may further intensify the litigation, if the authorities start questioning the base computation of 20%, in case the credit is subsequently disallowed to the taxpayers during the course of audit/ assessment.
9) Adjustment of 20% credit against the invoices: The rule does not provide for any mechanism to apportion the 20% amount computed by the taxpayer amongst the invoices which are not reported by the suppliers. In other words, the rule does not provide whether 20% can be applied by the taxpayer to any invoice/s or it should be proportionately applied to all the unreported invoices.
10) Procurement from suppliers filing GSTR-1 on Quarterly Basis: The GST law has provided an option to the taxpayers to file GSTR-1 on quarterly basis whose aggregate turnover does exceed Rs. 1.50 crore during the preceding financial year. Given this, it would be difficult to avail the credit in respect of procurements made from such suppliers.
11) Date of implementation: The amendments carried out in CGST Rules are effective from 01.10.2019. Given this, it is imperative for the taxpayers to know whether the restriction should be applied for filing the return for the month of September 2019 or from October 2019.
INPUT tax credit ('ITC') is the soul of GST framework, which is pivotal in achieving 'One Nation One Tax' agenda of the Government. Since the introduction of model GST Law, matching of invoices for availment of ITC has been the most deliberated and debated aspect of the GST framework. 
