In 43rd Meeting of the GST Council, dated 28th May 2021 there is one major relief relating to COVID 19 is provided i.e Cumulative application of rule 36(4) for availing ITC for tax periods April, May and June, 2021 in the return for the period June, 2021.
What Is the meaning of Cumulative application of rule 36(4) for availing ITC for tax periods April, May and June, 2021 in the return for the period June, 2021 ?
Before understanding this relaxation, we should know about Rule 36(4) which provides Maximum ITC that can be taken in return period is ITC which is reflected in GSTR 2B relating to that return period plus 5% i.e. If Rs. 100000 is reflected in jan 2B then maximum ITC will be Rs. 105000 in jan month.
Now even if recipient has actual GST on invoice basis Rs. 200000 , he can take only Rs. 105000 and next 95000 will be available when supplier will upload return which results into blocking of money for few months.
Now as per relaxation provided we need not to see April 21 and May 21 GSTR 2B , we can take Credit as per Invoice basis that is by ignoring rule 36(4) .
Now when we come in June month we need to take all three months GSTR 2B plus 5% that can be maximum cumulative ITC for April, may and June Month.
Now Suppose after totalling of ITC in GSTR 2B for three months comes to Rs. 500000 and we have taken rs. 400000 already in April and May month then max ITC that can be taken in June month is Rs. (500000 plus 5%) -Rs. 400000 I. E Rs. 125000.
In case if we have already taken rs. 600000 in two months then in June 21 we need to reverse Rs. 600000-525000 = rs. 75000.
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