NEW PROCEDURE TO CLAIM INPUT TAX CREDIT WITH EFFECT FROM 09.10.2019 (Vide Notification no. 49/2019 dated 09.10.2019)

♦ Input Tax Claim shall not exceed GSTR 2A Total ITC +  20% of GSTR 2A ITC Amount   (This amount should not exceed Eligible credit for the month)

For e.g. :  If eligible ITC for the month of October 2019 is Rs 10 Lakhs, and ITC available in GSTR 2A is Rs 8 Lakhs, eligible ITC is:    8 Lakhs + 20% of 8 Lakhs = 9.6 Lakhs) .

In this case , if the dealer have  8.3 Lakhs or more in GSTR2A , dealer can claim full ITC ( Rs 10 Lakhs) in GSTR3B of October 2019.  (This is because, the gap between the available credit in GSTR2A (Rs. 8.3 Lakhs) and The ITC Claim (Rs. 10.00 Lakhs) for the month of October 2019  is  below  or equal to 20% of GSTR2A amount.  If the gap is below or equal to 20%, dealer can claim 100% ITC in the month of October 2019)

SAMPLE WORKINGS:

If the dealer have credit in 2A IS below Rs 8.3 Lakhs , the ITC eligibility is restricted to 20 % of eligible credit available in GSTR 2A. Please find the below table (THREE CASES GIVEN AS SAMPLE) for calculating eligible ITC for October 2019:

Case Available Balance in GSTR 2A for October 2019 20% of Eligible Credit   (A*20%) Eligible ITC to be taken in GSTR 3B   (A+B)
A B C
Case 1 6,00,000 1,20,000 7,20,000
Case 2 7,00,000 1,40,000 8,40,000
Case 3 8,50,000 1,70,000 10,00,000*

*8,50,000 + 1,70,000= 10,20,000 , Eligible ITC limited to  Rs 10,00,000

♦ How the the balance ITC to be claimed

The balance ITC be claimed by the taxpayer in any of the succeeding months (November 2019 onwards) provided details of requisite invoices are uploaded by the suppliers.

Procedure and Calculations for availing  the  balance ITC of  October 2019 is given below with reference to CASE 1 given above:

Return Month Available in GSTR2A against October (assumptions) Already availed ITC Or Eligible ITC in each month from October Cumulative ITC balance of October month Calculation for arriving Column F
D E F G
October 2019 6,00,000 7,20,000 7,20,000 =600000*1.20
November 2019 1,20,000 1,00,000 8,20,000 =1,20,000/1.20
December 2019 80,000 67,000 8,87,000 =80,000/1.20
January 2020 40,000 33,000 9,20,000 =40,000/1.20
February 2020 30,000 25,000 9,45,000 =30,000/1.20
March 2020 1,30,000 55,000* 10,00,000 Already availed 9.45 Lakhs .Balance can avail only 0.55 Lakhs
Total 10,00,000 10,00,000  

Additional Notes:

  • The restriction imposed is on consolidated basis and not supplier wise.
  • The above rule is not applicable in the following cases:
  • ITC against import purchase (ITC against import should be given in GSTR 3B in the corresponding column of import purchase and not to be given in All Other ITC).
  • ITC against Reverse Charge Mechanism.
  • Credit received from Input Service Distributor.
  • Any ineligible ITC in GSTR 2A to be excluded from the calculation of the above rule.
  • Any previous month ITC included in current month GSTR 2A to be separately taken.

SUGGESTION: TO AVOID THE ABOVE COMPLICATED CALCULATIONS, YOU CAN OPT FOR A BETTER WAY IN  RETURN FILING.  CLAIM ITC AS PER RESPECTIVE GSTR 2A ONLY.  IF THE DEALER HAS SUFFICIENT ACCUMULATED ITC IN THEIR CREDIT LEDGER, OPT FOR THIS OPTION.  SO, YOU WILL BE FREE FROM THE ABOVE SAID CALCULATIONS AND RULES.

Author Bio

Qualification: Graduate
Company: E TAX COCHIN
Location: ALAPPUZHA, Kerala, IN
Member Since: 06 Nov 2019 | Total Posts: 1
Tax Consultant from Cochin, Kerala. Visit www.etaxcochin.com View Full Profile

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2 Comments

  1. PARVEENMAHAJAN says:

    I feel there is some thing wrong in calculation in case 1

    ITC of Rs.10 lakh in October can be availed according to ITC available in 2A in months as under:

    Oct. – 720000 against 600000 in 2A
    Nov. – 144000 against 120000 in 2A
    Dec – 96000 against 80000 in 2A
    Jan – 40000 against 40000 in 2A
    Feb – 0 against 30000 in 2A
    Mar – 0 against 130000 in 2A

    If still I am wrong please clarify.

    1. rejimonprctla says:

      Dear Sir,
      As per the Clarification circular issued by the GST Department dtd 11.11.2019, the upcoming months eligibility need to calculate by dividing the itc/1.2. Means, the given example in my calculation is more easier for future returns. Otherwise, every month we need to prepare check whether the total 10 lakhs covered or not. Moreover, these are all not practical. Better, take the ITC based on GSTR2A and instruct the suppliers to upload their bills properly

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