The court upheld the validity of Rule 36(4) of the GST Rules, stating the restrictions on Input Tax Credit were reasonable and aimed at preventing fraudulent claims, with the issue becoming academic post-implementation of Form GSTR 2A.

(Order of the Court was made by C. SARAVANAN, J.

In these Writ Petitions, the Petitioner has challenged the vires of Rule36(4) of both Central Goods and Services Tax (CGST) Rules, 2017 (hereinafter referred to as 'CGST Rules') and Tamil Nadu Goods and Services Tax (TNGST) Rules, 2017 (hereinafter referred to as 'TNGST Rules'). Rule 36(4) of the respective GST Rules read identically.

2. These Writ Petitions are of the year 2020. When these Writ Petitions were filed, Rule 36(4) of the respective GST Rules read differently from how it read after its amendment with effect from 01.01.2022

3. Rule 36(4) of the CGST Rules as it stood at the time when these Writ Petitions were filed and at the time of passing of this Order are reproduced below for the sake of clarity:-

Table-I

(1) .....

(2) .....

(3) .....

(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.

(1) .....

(2) .....

(3) .....

(4) No Input Tax Credit shall be availed by a registered person in respect of invoices or debit notes the details of which are required to be furnished under sub-section (1) of section 37 unless,-

(a) the details of such invoices or debit notes have been furnished by the supplier in the statement of outward supplies in FORM GSTR-1 or using the invoice furnishing facility; and

(b) the details of input tax credit in respect of such invoices or debit notes have been communicated to the registered person in FORM GSTR-2B under sub-rule (7) of rule 60.

4. During the period between 01.01.2017 and 08.10.2019, the impugned Rule in these Writ Petitions, i.e., Rule 36(4) were not there in the respective GST Rules. The above provision was inserted by CGST (6^th Amendment) Rules 2019 with effect from 09.10.2019. Later, the aforesaid Rule was further amended on various occasions. Finally, vide CGST (10^th Amendment) Rules, 2021 with effect from 01.01.2022, Rule 36(4) of the respective GST Rules stands as extracted above in Column 2 in Table I of this Order.

5. As far as TNGST Rules are concerned, Rule 36(4) of the Rules was first inserted by Notification No. SRO A-39(a)/2019 dated 11.10.2019 with effect from 09.10.2019 vide TNGST (6^th Amendment) Rules, 2019. The impugned amendment to Rule 36(4) of the TNGST Rules was later substituted by Notification No. SRO A-48(a)/2020 dated 23.12.2020 with effect from 01.01.2021 vide TNGST (14^th Amendment) Rules, 2020.

6. At the time of inception of Rule 36(4) of the respective GST Rules, with effect from 09.10.2019, a registered person was entitled to avail restricted Input Tax Credit (ITC) equivalent to the 20% of the eligible credit if the details of invoices or debit notes had not been uploaded by the supplier under Section37(1) of the respective GST Acts.

7. The restrictions in the sub-clause (4) to Rule 36 of the respective GST Rules that was initially fixed at 20% with effect from 09.10.2019 was reduced over a period to 10% and thereafter to 5% and eventually to 'Nil' Input Tax Credit (ITC), if the details, required un