Circular No. 123/42/2019– GST

F. No. CBEC 20/06/14/2019 GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
******

New Delhi, the 11th November, 2019

To
The Pr. Chief Commissioners/Chief Commissioners/Principal Commissioners / Commissioners of Central Tax (All),
The Principal Director Generals / Director Generals (All)

Madam / Sir,

Subject: Restriction in availment of input tax credit in terms of sub-rule (4) of rule 36 of CGST Rules, 2017 reg.

Sub-rule (4) to rule 36 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) has been inserted vide notification No. 49/2019-Central Tax, dated 09.10.2019. The said sub-rule provides restriction in availment of input tax credit (ITC) in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act).

2. To ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act hereby clarifies various issues in succeeding paragraphs.

3. The conditions and eligibility for the ITC that may be availed by the recipient shall continue to be governed as per the provisions of Chapter V of the CGST Act and the rules made thereunder. This being a new provision, the restriction is not imposed through the common portal and it is the responsibility of the taxpayer that credit is availed in terms of the said rule and therefore, the availment of restricted credit in terms of sub-rule (4) of rule 36 of CGST Rules shall be done on self-assessment basis by the tax payers. Various issues relating to implementation of the said sub-rule have been examined and the clarification on each of these points is as under: –

Sl. No Issue Clarification
1. What are the invoices /debit notes on which the restriction under rule 36(4) of the CGST Rules shall
apply?
The restriction of availment of ITC is imposed only in respect of those invoices / debit notes, details of which are required to be uploaded by the suppliers under sub-section (1) of section 37 and which have not been uploaded. Therefore, taxpayers may avail full ITC in respect of IGST paid on import, documents issued under RCM, credit received from ISD etc. which are outside the ambit of sub-section (1) of section 37, provided that eligibility conditions for availment of ITC are met in respect of the same. The restriction of 36(4) will be applicable only on the invoices / debit notes on which credit is availed after 09.10.2019.
2. Whether the said restriction is to be calculated supplier wise or on consolidated basis? The restriction imposed is not supplier wise.The credit available under sub-rule (4) of rule 36 is linked to total eligible credit from all suppliers against all supplies whose details have been uploaded by the suppliers. Further, the calculation would be based on only those invoices which are otherwise eligible for ITC. Accordingly, those invoices on which ITC is not available under any of the provision (say under sub-section (5) of section 17) would not be considered for calculating 20 per cent. of the eligible credit available.
3. FORM GSTR-2A being a dynamic document, what
would be the amount of input tax credit that is admissible to the taxpayers for a
particular tax period in respect of invoices / debit notes whose details have not been uploaded by the
suppliers?
The amount of input tax credit in respect of the invoices / debit notes whose details have not been uploaded by the suppliers shall not exceed 20% of the eligible input tax credit available to the recipient in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37 as on the due date of filing of the returns in FORM GSTR-1 of the suppliers for the said tax period. The taxpayer may have to ascertain the same from his auto populated FORM GSTR 2A as available on the due date of filing of FORM GSTR-1 under sub-section (1) of section 37.
4. How much ITC a registered tax payer can avail in his
FORM GSTR-3B in a month in case the details of some of the invoices have not been uploaded by the suppliers under sub- section (1) of section 37.

Sub-rule (4) of rule 36 prescribes that the ITC to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent. of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37. The eligible ITC that can be availed is explained by way of illustrations, in a tabulated form, below.

In the illustrations, say a taxpayer “R” receives 100 invoices (for inward supply of goods or services) involving ITC of Rs. 10 lakhs, from various suppliers during the month of Oct, 2019 and has to claim ITC in his FORM GSTR-3B of October, to be filed by 20th Nov, 2019.

Details of suppliers’ invoices for which recipient is eligible to take ITC 20% of eligible credit where invoices are uploaded Eligible ITC to be taken in GSTR-3B to be filed by 20th Nov.
Case 1

 

Suppliers have furnished in FORM GSTR-1 80 invoices involving ITC of Rs. 6 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers. Rs.1,20,000/- Rs. 6,00,000 (i.e. amount of eligible ITC available, as per details uploaded by the suppliers) + Rs.1,20,000 (i.e. 20% of amount of eligible ITC available, as per details uploaded by the suppliers) = Rs. 7,20,000/-
Case 2

 

Suppliers have furnished in FORM GSTR-1 80 invoices involving ITC of Rs. 7 lakhs as on the due date of furnishing of the details of  outward supplies by the suppliers. Rs. 1,40,000/- Rs 7,00,000 + Rs. 1,40,000 = Rs. 8,40,000/-
Case 3

 

Suppliers have furnished in FORM GSTR-1 75 invoices having ITC of Rs. 8.5 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers. Rs. 1,70,000/- Rs. 8,50,000/- + Rs.1,50,000/-* = Rs. 10,00,000

* The additional amount of ITC availed shall be limited to ensure that the total ITC availed does not exceed the total eligible ITC.

5. When can balance ITC be claimed in case availment of ITC is restricted as per the provisions of rule 36(4)? The balance ITC may be claimed by the taxpayer in any of the succeeding months provided details of requisite invoices are uploaded by the suppliers. He can claim proportionate ITC as and when details of some invoices are uploaded by the suppliers provided that credit on invoices, the details of which are not uploaded (under sub-section (1) of section 37) remains under 20 per cent of the eligible input tax credit, the details of which are uploaded by the suppliers. Full ITC of balance amount may be availed, in present illustration by “R”, in case total ITC pertaining to invoices the details of which have been uploaded reaches Rs. 8.3 lakhs (Rs 10 lakhs /1.20). In other words, taxpayer may avail full ITC in respect of a tax period, as and when the invoices are uploaded by the suppliers to the extent Eligible ITC/ 1.2. The same is explained for Case No. 1 and 2 of the illustrations provided at Sl.No. 3 above as under:

Case 1

 

“R” may avail balance ITC of Rs. 2.8 lakhs in case suppliers upload details of some of the invoices for the tax period involving ITC of Rs. 2.3 lakhs out of invoices involving ITC of Rs. 4 lakhs details of which had not been uploaded by the suppliers. [Rs. 6 lakhs + Rs. 2.3 lakhs = Rs. 8.3 lakhs]
Case 2

 

“R” may avail balance ITC of Rs. 1.6 lakhs in case suppliers upload details of some of the invoices involving ITC of Rs. 1.3 lakhs out of outstanding invoices involving Rs. 3 lakhs. [Rs. 7 lakhs + Rs. 1.3 lakhs = Rs. 8.3 lakhs]

4. It is requested that suitable trade notices may be issued to publicize the contents of this Circular. Hindi version will follow.

(Yogendra Garg)
Principal Commissioner (GST)

More Under Goods and Services Tax

16 Comments

  1. Santosh says:

    GsT.. Good and Simple Tax.. For whom?. .. Taxpayers.. .. . Nooooo for Govt.. Only

    All the burdens is put on the shoulders of Taxpayers only.. .
    Now again -“Restriction in availment of input tax credit in terms of sub-rule (4) of rule 36 of CGST Rules, 2017 – reg ” is the worst thing that is going to affect the cash flow of small taxpayers.. . Since the GSTR-1 (opt. Quarterly) to be filed on quarterly basis.. By the supplier and recipient has no option to take ITC on the same month.. But only on thebmonth succeding quarter end.. .

    The problem with the government is the implementation issue.. GOVT. should make compulsory monthly filing of GSTR-1 for all taxpayers. . then only this 20% Restriction on ITC would have been justified.. .

    But ..

  2. DIPEN PATANI says:

    Need stable system to make it easier if frequently changes done I don’t think so system will move ahead in manner & required discipline

  3. Arup Kumar says:

    Govt not going to make Gst simplified. It is Just to monitor whether suppliers are uploading their invoices or no.
    And making the process more cumbersome and complex.

  4. BHUVANEWARI says:

    all govt officers work put on gst holders once purchase
    hard there we have a full right to take input credit.
    unwant 2a reconcilation and 20% etc work. gst make it simply. 24 hrs cannot sit before system to watch 2a

  5. Pavan Agrawal says:

    This is the series of useless and making hurdle intentionally . If some one in quarter system that how he can upload bills monthly.
    Govt not going to make Gst simplified .

    1. S Padmanaban says:

      This 20% & 80 % gives additional unwanted burden on Tax Payers It gives ways to officials to sqeuse the
      small tax payers.
      It is better to say clearly to avail only the ITC available in GSTR2 A . no problem in filing the Annual retrun also. Let the buyer avoid buying from Non filers.

    2. Sanjay Khandwe says:

      In my opinion, to fall within the ambit of this circular, one has has to check following two conditions primarily i.e.
      – Whether payment is made within 180 days from the date of invoice; and
      – whether invoices are uploaded by supplier through GSTR-1, consequently be depicted at GSTR-2.

      This clearly indicate that the supplier is having sufficient time to file GSTR-1.

  6. B.P.Kuyate says:

    ITC Restriction is very important role & it affect government revenue collection ,
    No any clarification given regarding , if supplier filed GSTR1 on quarterly basis and customer filed on monthly basis, Also GST portal not allowing GSTR1 filing on monthly if exhisting filing frequency on quarterly

  7. Madhusoodanan says:

    What about in case the supplier upload his invoices on quarterly basis. The buyer wants to wait for 3 months to avail ITC even though he paid cash for tax amount at the time of purchase. This is Foolish acts. Either the process of restriction will be on quarterly basis or bite the seller who are not uploading invoices in time.

  8. Periasamy says:

    GST council may recommend RCM of all B2B businesses. Collection of GST only on B2C. The sellers of B2C will pay the tax on sales after adjusting ITC paid by him under RCM.

  9. Uttam Kumar Paul says:

    ITC credit will be taken as per hard copy supplied by the supplier duly seal & signature which is legal & justified which is primary, but GSTR-1 filing is not our look out as because we are purchased the goods by Demand Draft,Cheque,RTGS.So we rely on hard copies and not on GSTR-1 as proved ourselves to the authority concerned.

    1. CA Parth Shah says:

      Well this is ridiculous step by government. How they can curtail ITC like this. Govt done have capacity to catch the actual tax evasors and now they want the honest dealers to pay the price.

      This has definitly to be definitely withdrawn.

      Instead of this, they should have made credit mechanism on cash basis. Dealer can get ITC only when he pays to the supplier. This will remove all the working capital blockage from the system due to the GST. Dealer would prefer to pay to supplier sooner in order to claim ITC.

      1. Rakhmaji says:

        Yes, “Instead of this, they should have made credit mechanism on cash basis. Dealer can get ITC only when he pays to the supplier. This will remove all the working capital blockage from the system due to the GST. Dealer would prefer to pay to supplier sooner in order to claim ITC.”

        This should implement instead of 20% of on ITC uploaded by suppliers

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