Title:- Provisional Credit under rule 36(4) of the CGST, 2017
Applicability:- 1st Jan’2020
Law:- The CBIC vide notification no. 49/2019- Central Tax dated 9 October 2019 inserting a new sub-rule (4) under rule 36 of the CGST Rules, 2017 which states that the provisional tax credit (without invoices on GSTR-2A) can be claimed in the GSTR-3B only to the extent of 10% of eligible* ITC reflected in the GSTR-2A. Hence, the total ITC that can be claimed in GSTR-3B is 110% of the eligible ITC appearing in the GSTR-2A of a particular period.
Further, the ITC claim was earlier restricted to 20% for the period from 9 Oct 2019 to 31 Dec 2019.
* Eligible ITC is the ITC relating to a taxpayer’s business activities such as purchases made, services received, capital assets bought, etc. which is eligible to be claimed to set-off GST liabilities. The GSTR-2A could also contain ineligible ITC reflecting that relates to expenses such as food, club memberships, personal expenditure, etc or even ITC mistakenly reflecting due to the wrong GSTIN entered by a supplier. Hence, only eligible ITC will be considered while calculating the limit for 10% provisional credit.
Illustration:-
- Availability of ITC before & after Insertion of Rule
- Considering Only Eligible ITC
| ITC as per Books
(Rs.) |
ITC as per 2A
(Rs.) |
Before Insertion of Rule | After Insertion of Rule |
| 1,00,000 | 80,000 | 1,00,000 | 88,000 |
| 1,00,000 | 1,20,000 | 1,00,000 | 1,00,000 |
- Considering Eligible & Ineligible ITC
| Total ITC as per Books
(a) |
Eligible ITC as per Books
(b) |
Total ITC as per 2A
(c) |
Eligible ITC as per 2A
(d) |
Before Insertion of Rule | After Insertion of Rule |
| 1,00,000 | 85,000 | 80,000 | 60,000 | 85,000 | 66,000
(Provisional Credit: 60,000*10%) |
| 1,00,000 | 85,000 | 1,20,000 | 1,00,000 | 85,000 | 85,000 |
- Availability of ITC after Insertion of Rule in the Book of Accounts
- Considering Only Eligible ITC
| Month | ITC as per Books
(Rs.) |
ITC as per 2A
(Rs.) |
After Insertion of Rule |
| Jan’2020 | 1,00,000 | 80,000 | 88,000
(Provisional Credit: 80,000*10%) |
| Feb’2020 | 1,00000 | 1,20,000 | 1,12,000*
(Assuming that ITC of Jan’2020 now reflecting in GSTR:2A) |
* Maximum ITC can be claim after Insertion of New Rule: Rs. 1,32,000 (Rs. 1,20,000 + 1,20,000*10%).
But ITC remaining in the Books of Jan’2020 : 12,000 (Rs. 1,00,000- 88,000).
Hence, the total ITC that can be claim in Feb’2020 : Rs. 1,12,000 (Rs. 1,00,000 +12,000).
- Considering Eligible & Ineligible ITC
| Month | Total ITC as per Books
(a) |
Eligible ITC as per Books
(b) |
Total ITC as per 2A
(c) |
Eligible ITC as per 2A
(d) |
After Insertion of Rule |
| Jan’2020 | 1,00,000 | 85,000 | 80,000 | 60,000 | 66,000
(Provisional Credit: 60,000*10%) |
| Feb’2020 | 1,00,000 | 80,000 | 1,20,000 | 1,00,000 | 99,000*
(Assuming that ITC of Jan’2020 now reflecting in GSTR:2A) |
* Maximum ITC can be claim after Insertion of New Rule: Rs. 1,10,000 (Rs. 1,00,000 + 1,00,000*10%).
But ITC remaining in the Books of Jan’2020 : 19,000 (Rs. 85,000- 66,000).
Hence, the total ITC that can be claim in Feb’2020 : Rs. 99,000 (Rs. 80,000 +19,000).
Authored by- CA Gaurav Singla, CA Shalini Singla
Author Bio
