The Government previously provided relief to taxpayers for addressing discrepancies between GSTR 3B and GSTR 2A through Circular No. 183/15/2022-GST dated 27th December 2022, applicable to the Financial Years 2017-18 and 2018-19. However, with the introduction of Rule 36(4) effective from 9th October 2019, this circular became inadequate for the Financial Years 2019-20 onwards. Consequently, Circular No. 193/05/2023-GST was issued by CBIC on 17th July 2023 to clarify the impact of Rule 36(4) on the mismatch of GSTR 3B and GSTR 2A, and how the earlier circular’s guidelines are to be applied in resolving these discrepancies.
Key Points of Circular No. 193/05/2023-GST
1. Rule 36(4) Overview: Rule 36(4) of the CGST Rules restricts the availment of Input Tax Credit (ITC) by registered persons to a specified limit beyond the ITC available as per FORM GSTR 2A. This rule became effective from 9th October 2019.
2. Applicability of Circular No. 183/15/2022-GST: The guidelines provided in Circular No. 183/15/2022-GST are applicable in entirety for the period from 01.04.2019 to 08.10.2019, before the implementation of Rule 36(4).
3. Period from 09.10.2019 to 31.12.2019: During this period, Rule 36(4) allowed registered persons to avail ITC in respect of invoices or debit notes not furnished by suppliers under section 37(1) in FORM GSTR-1 or using IFF, up to 20% of the eligible credit available for invoices or debit notes already furnished by suppliers.
4. Period from 01.01.2020 to 31.12.2020: Rule 36(4) permitted an additional 10% credit in excess of that reported by suppliers in their FORM GSTR-1 or IFF.
5. Period from 01.01.2021 to 31.12.2021: Rule 36(4) allowed an additional 5% credit in excess of that reported by suppliers in their FORM GSTR-1 or IFF.
6. Changes from 01.01.2022 onwards: Following the insertion of clause (aa) to sub-section (2) of section 16 of the CGST Act and amendments to Rule 36(4) of the CGST Rules, no ITC is allowed for supplies unless reported by suppliers in FORM GSTR-1 or IFF and communicated to the registered person in FORM GSTR-2B.
Summary and Assumptions
To illustrate the practical implications, assume:
- ITC claimed as per GSTR 3B is Rs. 100/-
- ITC appearing in GSTR 2A is Rs. 50/-
Sl. No. |
Financial Year |
Period |
Maximum Permissible Difference in accordance with Rule 36(4) in comparison to ITC available as per GSTR 2A (%) |
ITC Claimed in GSTR 3B |
Credit reported by the suppliers in their FORM GSTR-1 or IFF (ITC available as per GSTR 2A) |
Excess Claim of ITC |
ITC to allowed on production of Certificates in accordance with Circular No. 183/15/2022-GST |
ITC to be disallowed in accordance with Rule 36(4) |
A |
B |
C |
D |
E |
F |
(G = E-F) |
(H= FXD) |
(I = G-H) |
1 |
2017-19 |
01.07.2017- 31.03.2018 |
100% |
100 |
50 |
50 |
50 |
0 |
2 |
2018-19 |
01.04.2018- 31.03.2019 |
100% |
100 |
50 |
50 |
50 |
0 |
3 |
2019-20 |
01.04.2019- 08.10.2019 |
100% |
100 |
50 |
50 |
50 |
0 |
4 |
2019-20 |
09.10.2019-31.12.2019 |
20% |
100 |
50 |
50 |
10 |
40 |
5 |
2019-20 |
01.01.2020-31.03.2020 |
10% |
100 |
50 |
50 |
5 |
45 |
6 |
2020-21 |
01.04.2020-31.12.2020 |
10% |
100 |
50 |
50 |
5 |
45 |
7 |
2020-21 |
01.01.2021-31.03.2021 |
5% |
100 |
50 |
50 |
2.5 |
47.5 |
8 |
2021-22 |
01.04.2021-31.12.2021 |
5% |
100 |
50 |
50 |
2.5 |
47.5 |
9 |
01.01.22 onwards. |
– |
100 |
50 |
50 |
0 |
50 |
The basic purpose of issuance of Circular No. 183/15/2022-GST was to check the compliance with conditions of clause (c) of sub-section (2) of Section 16 of CGST Act for a particular period. So, when the credit has been reported by the supplier in his GSTR 1/IFF, then it should be verified that the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply.
Further Clarifications from Circular
Additional points clarified in Circular No. 193/05/2023-GST include:
1.Rule 36(4) of CGST Rules was inserted vide Notification No. 30/2020-CT dated 03.04.2020 to provide that the condition of rule 36(4) shall be applicable cumulatively for the period February to August, 2020 and ITC shall be adjusted on cumulative basis for the said months in the return for the tax period of September 2020.
Analysis: Additional Credit allowed in accordance with Rule 36(4) for that period is 10%, So, while determining the ITC to be disallowed in accordance with the Rule, the percentage should be applied on the cumulative figure of ITC for the period.
2. Second proviso to rule 36(4) of CGST Rules was substituted vide Notification No. 27/2021-CT dated 01.06.2021 to provide that the condition of rule 36(4) shall be applicable cumulatively for the period April to June, 2021 and ITC shall be adjusted on cumulative basis for the said months in the return for the tax period of June 2021.
Analysis: Additional Credit allowed in accordance with Rule 36(4) for that period is 5%, So, while determining the ITC to be disallowed in accordance with the Rule, the percentage should be applied on the cumulative figure of ITC for the period.
Conclusion: Circular No. 193/05/2023-GST provides essential clarity on the application of Rule 36(4) concerning ITC discrepancies between GSTR 3B and GSTR 2A. It ensures that registered persons adhere to the specific limits on ITC claims based on the evolving provisions from October 2019 onwards. By defining the permissible credit and the conditions under which it can be availed, this circular aids taxpayers in maintaining compliance with the GST framework. Understanding these guidelines is crucial for accurate tax filings and avoiding potential disallowances of ITC.
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