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Sec 16(2)(c) — ITC is conditional upon tax being PAID by the supplier to the Government. CBIC clarified this via:
ANo relief — recipient bears the risk
BOperationalised via Rule 36(4) — ITC only on invoices/debit notes which are reflected in GSTR-2B
CRule 88 — payment-only
DSec 41 — provisional credit forever
Answer & Solution
Correct answer: B. Operationalised via Rule 36(4) — ITC only on invoices/debit notes which are reflected in GSTR-2B
1. Sec 16(2)(aa) (inserted via FA 2021, effective 01.01.2022) operationalises Sec 16(2)(c) by mandating that ITC is available only if the invoice details have been furnished by the supplier in his GSTR-1 and communicated to the recipient via GSTR-2B.
2. Rule 36(4) (now subsumed into 2B-based credit) ensures the matching.
3. Mismatch → no ITC. The recipient has recourse against the supplier (commercial), not against the exchequer.
_Source: ICAI BoS CA Final Paper 8, Ch 6 "Input Tax Credit", §Sec 16(2)(aa) + Rule 36(4)_
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