Article explains What’s the restriction on Input Tax Credit under GST, On what Invoices/debit notes is the restriction on Input Tax Credit under GST imposed, Calculation of restriction of Input Tax Credit under GST, Amount of ITC to be availed under GST, What would be the impact of the restriction on Input Tax Credit under GST and How to deal with this restriction on Input Tax Credit under GST.
The recent notification followed by a circular issued on 11 November 2019 states regarding restriction on availment of ITC. The ITC in respect of invoices or debit notes, the details of which have not been provided for by the supplier has been restricted.
This is not an automatic restriction by the portal and has to be exercised by the taxpayer himself on basis the reconciliation.
Page Contents
The taxpayers claiming ITC on the basis of the invoices, are now required to ascertain if the corresponding details are uploaded by the supplier in their GSTR 1 consequently making it available as ITC in buyer’s GSTR 2A.
The amount of ITC to be availed by the taxpayers in respect of invoices whose details have not been uploaded by the suppliers shall not exceed 20% of the eligible credit available in respect of invoices, the details of which have been uploaded by the suppliers.
Under this rule, the restriction is not imposed supplier wise. The credit available will be reconciled with the total eligible credit uploaded by all the suppliers combined.
The supplies on which ITC is not available under any provision will not be considered for calculating 20% of eligible credit available.
The ITC for the invoices/debit note whose details have not been uploaded shall not exceed 20% of the eligible credit available for the invoice and debit notes whose details have been uploaded.
The following illustrations can explain eligible ITC:
Case- taxpayer ‘A’ receives 100 invoices involving ITC of Rs. 10 lakh.
Details of supplies eligible for ITC | 20% of eligible credit | Eligible ITC to be taken |
Suppliers have furnished 80 invoices involving ITC of Rs. 6 lakhs | Rs. 1,20,000 | Rs 7,20,000
[6,00,000 (amount eligible for ITC) + 1,20,000 ((6,00,000*20%) on the basis of details uploaded by the supplier)] |
Suppliers have furnished 80 invoices involving ITC of Rs. 7,00,000 | Rs. 1,40,000 | Rs. 8,40,000
(7,00,000 + 1,40,000) |
Suppliers have furnished 75 invoices involving ITC of Rs. 8,50,000 | Rs. 1,70,000 | 10,00,000
(8,50,000 + 1,50,000*) *Additional amount of ITC availed shall be limited to ensure that ITC availed does not exceed the total eligible ITC. |
Currently the taxpayers with annual turnover up to 1.5 crore are required to furnish the GSTR 1 on quarterly basis while others are required to submit GSTR 1 on monthly basis. Further, all the taxpayers are required to settle the net GST liability every month through GSTR 3B and this is the return where the restriction is imposed, which could mean lesser availability of ITC as compared to previous months and consequently output liability will have to be settled through challan remittances.
This restriction now makes the reconciliation of ITC as per GSTR 2A with the ITC available as per Invoices, an exercise to be carried at-least on a monthly basis.
Disclaimer:Â The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.
The author is a CA in practice at Delhi and can be contacted at: E-mail: abhinandansethia90@gmail.com, Mobile: +91-9811741451
AS PER VIEW PERSONE WHO FILLE THE GSTR-1 QUARTERLY BASIS ARE NOT COVERED UNDER THE RULE 36(4) AS ONLY COVERED SUPPLIER U/S 37(1) READ THE NOTIFICATION 57/2017 DATED 15.11.2017 ALONG WITH THAT