Gaurav Jha

Clarification on restriction in availment of input tax credit under rule 36(4) CGST Rules, 2017

Sub-rule (4) to rule 36 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) provide 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).

Various issues relating to implementation of the said sub-rule have been examined and the clarification on each of these points is as under: –

> 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 Invoices which are outside the ambit of sub-section (1) of section 37 such as –

  • IGST paid on import,
  • Documents issued under RCM,
  • Credit received from ISD etc.

> 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.

> 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?

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

> 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.

Total Input tax credit to be availed by the taxpayers in a particular tax period in case the details of some of the invoices have not been uploaded by the suppliers under sub- section (1) of section 37 shall be lower of the following:

120% of Eligible ITC or

100% of total ITC

It can be discussed with the help of following examples:

Case 1: Total ITC on purchase – 10,00,000, ITC not reflecting under 2A – 4,00,000, ITC(Eligible) reflecting in 2A – 6,00,000, ITC can be claimed – ?

ITC can be claimed = 720000*1

*1 Lower of the following,

120 % of 6,00,000 = 7,20,000

100% of 10,00,000 = 10,00,000

Case 2: Total ITC 1000000, ITC not under 2A – 100000, ITC in 2A(Eligible)- 900000, ITC can be claimed – ?

ITC can be claimed – 10,00,000*2

*2 Lower of the following,
120 % of 9,00,000 = 10,80,000
100% of 10,00,000 =10,00,000

> 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 remains under 20 per cent of the eligible input tax credit.

In other words, a registered person could avail the 100% Input Tax Credit against the matching of 83.33% (100/1.20) Input Tax Credit in GSTR 2A.

And where less than 83.33% Input Tax Credit has been matched in GSTR 2A, than the credit shall be calculated with the help of following formula:

(Total ITC-ITC Availed in earlier Tax Period) X Invoices Issued during the tax period
Total ITC x 83.33% – ITC reflected under GSTR-2A in earlier Tax Period

Detailed Analysis with the help of an sample:

Month
Total ITC
ITC Reflecting
in GSTR-2A
ITC Not reflecting in GSTR -2A
ITC can be Availed
Normal ITC
ITC as per 36(4)
ITC Pending
April
1,000,000.00
600,000.00
400,000.00
720000*1
600,000.00
120,000.00
280,000.00
May
1,200,000.00
11,00,000.00 (200000 of April)
500,000.00
1320000*2
1,100,000.00
220,000.00
180,000.00
June
1,500,000.00
2,000,000.00
Nil
1660000*3
1,500,000.00
160,000.00
Nil
Total
3,700,000.00
3,700,000.00
900,000.00
3,700,000.00
3,200,000.00
500,000.00
460,000.00

*1 April,

6,00,000 X 120% or 10,00,000, whichever is lower, i.e. 7,20,000

*2 May,

A. ITC against Invoice not shown in April:

Since total ITC Shown in Books is less than 83.33 % of Total ITC,

Hence Eligible ITC of April for May = (10,00,000 – 7,20,000) X 2,00,000 = 2,40,000

(83.33%x10,00,000-6,00,000)

B. Eligible ITC of May = 9,00,000*120% or 12,00,000, whichever is lower, i.e. 10,80,000

Total Credit to be availed (A+B) in May = 2,40,000+10,80,000 = 13,20,000

*3 June,

A. ITC against Invoice not shown in April:

Since total ITC Shown in Books is more than 83.33 % of Total ITC, 100% of ITC will be allowed

ITC against April: (10,00,000-7,20,000-2,40,000) = 40,000

B. ITC against Invoice not shown in May:

Since total ITC Shown in Books is more than 83.33 % of Total ITC, 100% of ITC will be allowed

ITC against May: (12,00,000 -10,80,000) = 1,20,000

C. ITC against Invoice of June:

Since total ITC Shown in Books is more than 83.33 % of Total ITC, 100% of ITC will be allowed

ITC of June: 15,00,000

Total Credit to be availed (A+B+C) in June: 40,000+1,20,000+15,00,000 = 16,60,000.

Source- Circular No. 123/42/2019– GST Dated : 11th November 2019

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