ITC CALUCATIONS FOR THE MONTH OF NOVEMBER 2019 AND FOR THE SUBSEQUENT MONTHS TO COME ALONG WITH FEW OTHER ISSUES
Since most of us must have filed GSTR 3B for the month of October 2019 keeping in mind the new Rule 36(4). One thing we all have understood in GSTR-3B is that the record of calculations is now even more important. One of the biggest challenge now is that how to do the calculations for the month of November 2019 and for the subsequent months to come as we have already taken the provisional credit for the month of October 2019.
Many of the assesses were taking credit based on the purchase invoices they had and by simply calculating the total output liability and reducing all the input tax credit on purchase invoices minus the ineligible credit. For the month of October 2019 we had a step further and now 2A is also part of this process. Filing of October GSTR-3B is just the begining and the filing of November and subsequent returns would now be even more difficult for the taxpayers.
Now, it is clear that we need to keep a track of lot of things while taking credit in GSTR 3B. CBIC has already clarified by its circular no. 123/42/2019– GST dated 11th November, 2019 that there is no check point on the common portal regarding this new rule and taxpayers need to take the credit on self-assessment basis only. So it’s the sole responsibility of the registered person to take care of the new rule 36(4) while taking credit.
MONTHLY RECONCILIATION OF 2A AND BOOKS
Earlier many of the taxpayers were getting notices as to why 3B of a particular month is not matching with the corresponding 2A statement but due to the dynamic credit mechanism it was quite difficult to match both the statements and department was not having any particular basis to challenge the taxpayers for the same. But now, with the introduction of rule 36(4), department may send us notices again if the GSTR 3B credit doesn’t match with 2A statement and it will be challenging for the taxpayers to match the statements if proper calculations are not done.
HOW TO TAKE THE ITC FOR EVERY SINGLE MONTH
Let us understand this with an example.
|Particulars||October 2019 (CASE-1)||October 2019 (CASE-2)|
|1. Total ITC as per Books||100000||100000|
|2. Total ineligible ITC as per Books||10000||10000|
|3. Total Eligible ITC as per Books(1-2)||90000||90000|
|4. Total ITC as per 2A||65000||90000|
|5. Total Ineligible ITC as per 2A||5000||5000|
|6. Total Eligible ITC as per 2A (4-5)||60000||85000|
|7. Maximum ITC that can be availed for October [(120% of (6)] or (3) whichever is lower)||=60000*120%= 72000 or 90000 whichever is lower Maximum ITC= 72000||=85000*120%=102000 or 90000 whichever is lower Maximum ITC= 90000|
|8. Eligible credit already showing in 2A (6)||60000||85000|
|9. Provisional Credit for October 2019 (7-8)||72000-60000= 12000||90000-85000= 5000|
|10. Balance ITC to be claimed in subsequent months (3-7)||18000||Nil/-|
The above calculations seems not that difficult but when it comes to GSTR-3B of subsequent months, the correct calculations would play an important role. Let us go ahead for the month of November 2019
|1. Total ITC as per Books||200000|
|2. Total ineligible ITC as per Books||20000|
|3. Total Eligible ITC as per books(1-2)||180000|
|4. Total ITC as per 2A||130000|
|5. Total Ineligible ITC as per 2A||10000|
|6. Total Eligible ITC as per 2A (4-5)||120000|
|7. Maximum ITC that can be availed for November [(120% of (6)] or (3) whichever is lower)||=120000*120%= 144000 or 180000 whichever is lower Maximum ITC for Nov = 144000|
|8. Eligible credit already showing in 2A (6)||120000|
|9. Provisional Credit for November 2019 (7-8)||144000-120000= 24000|
|10. Balance ITC to be claimed in subsequent months (3-7)||36000|
Now we need to recheck the 2A for the month of Oct 2019 while filing the GSTR 3B for the month of November 2019
Additional ITC that can be taken related to Oct month= 10000*1.20= 12000
Minimum amount of invoices to be uploaded for claiming full input tax credit for the month of October 2019 (Total eligible ITC/ 1.2) = 90000/1.2= 75000
Now we need to recheck again the 2A for the month of Oct 2019 while filing the GSTR 3B for the month of December 2019
Minimum amount of invoices to be uploaded for claiming full input tax credit for the month of October 2019 (Total eligible ITC/ 1.2) = 90000/1.2= 75000 as already mentioned above.
The above calculations needs to be done for every single month till the time minimum amount of invoices are not uploaded by the suppliers on common portal for that particular month.
WHEN 2A STATEMENT SHOULD BE DOWNLOADED
The circular has clarified that we need to check the 2A as on the due date of filing the return under section 37 (1) (GSTR-1) by the suppliers which is 11th of the succeeding month for monthly filers. Since, many taxpayers file their GSTR-1 on 11th only and 2A being a dynamic document keeps on changing, it is suggested that 2A should be downloaded on the night of 11th or early morning of 12th of the succeeding month. However, once the due date is crossed for a particular month and suppliers upload invoices on the common portal in subsequent months, then the 2A statement for that month should be downloaded again according to the date of filing of GSTR-3B of the taxpayer who is claiming the ITC.
ISSUES FOR QUARTERLY FILERS
Those suppliers who file their GSTR-1 quarterly, it is still a mystery to know how the credit of those invoices is to be taken for individual months. In this case taxpayers need to wait for their suppliers quarterly filing first and then only they can take the credit. This simply means blockage of working capital for a long period of three months.
EASY WAY OUT
So the next question that comes to our mind is that if there is any easy way out for this.
The answer to this question is that if we don’t have any issue with working capital requirements then only the 2A values can be taken for the purpose of taking the credit and 20% provisional credit should be avoided. This will make the ITC calculations a little easier but at the same time there will be blockage of working capital to the extent of 20% that could have been taken by the registered person.
It is understandable that the government has put these ITC conditions so as to keep a check on the frauds that are currently going on in availing fake input tax credits. But, this mechanism is quite harsh on taxpayers part and the govt. should come up with something which is practically feasible for the taxpayers.