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

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