Section 38 – Communication of Details of Inward Supplies
Section 38 of CGST Act, 2017 – Communication of Details of Inward Supplies
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Scope and Importance of Section 38
Section 38 governs the communication of inward supply details to the recipient under GST.
This section is the legal foundation of auto-generated ITC statements such as GSTR-2B and directly impacts:
- Eligibility of Input Tax Credit (ITC)
- ITC restrictions and reversals
- Supplier-recipient reconciliation
2. Statutory Provision – Section 38(1)
The details of outward supplies furnished by the supplier under Section 37, and such other supplies as may be prescribed, shall be communicated electronically to the recipient in such form and manner, and within such time, as may be prescribed.
Such communication shall be subject to:
- Conditions
- Restrictions
as prescribed under the Act and Rules.
3. Auto-Generated Inward Supply Statement
Based on Section 38, the system generates an auto-drafted inward supply statement for the recipient.
Currently, this is operational through:
- GSTR-2B (static statement)
GSTR-2B reflects ITC availability supplier-wise and invoice-wise.
4. Eligible and Ineligible ITC – Section 38(2)
Section 38(2) mandates that the inward supply statement shall:
- Indicate ITC that may be availed, and
- Indicate ITC that shall not be availed
Ineligible ITC may arise due to:
- Supplier default in return filing
- Supplier classified as risky or non-compliant
- Invoice exceeding prescribed limits
- Supplies restricted under Section 16
5. Restrictions Communicated under Section 38
The system may restrict ITC where:
- Supplier has not furnished GSTR-1
- Supplier has defaulted in tax payment
- Supplier’s registration is cancelled or suspended
- Invoice is flagged as suspicious
Such ITC appears as “ITC not available” in GSTR-2B.
6. Section 38 Read with CGST Rules
Section 38 must be read with:
Rule 60 prescribes:
- Form of inward supply statement
- Frequency and manner of communication
- Details of eligible and ineligible ITC
7. Section 38 Read with Section 16
Section 38 does not grant ITC by itself.
ITC can be availed only if:
- Conditions under Section 16 are satisfied
- ITC appears as eligible in GSTR-2B
Thus, Section 38 acts as a filtering mechanism.
8. Impact on Recipient’s Return (GSTR-3B)
ITC claimed in GSTR-3B must:
- Match eligible ITC in GSTR-2B
- Exclude restricted or ineligible ITC
Mismatch may trigger:
- Notices under Section 61
- Demand under Section 73 / 74
9. Common Practical Issues
- Supplier files GSTR-1 late
- ITC missing in GSTR-2B despite genuine invoice
- Blocked ITC due to supplier default
- Reconciliation challenges between books and 2B
10. Related Provisions
- Section 16 – Eligibility and conditions for ITC
- Section 37 – Furnishing details of outward supplies
- Rule 60 – Inward supply communication
11. Professional Tip
GSTR-2B is not merely an information statement. It is a statutory ITC gatekeeper under Section 38. Regular supplier compliance review is essential to protect your ITC.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Future amendments or judicial pronouncements may require revision.
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