Relaxation on applicability of restriction on Provisional ITC under GST

Relaxation on applicability of restriction on Provisional Input Tax Credit (ITC) Under GST

Existing Provision:

The concept of claiming provisional Input Tax Credit (ITC) has been changed from the 38^th GST Council Meeting and now only 10% provisional ITC of Eligible ITC is allowed for the Invoices or debit notes not reflected in GSTR-2A and it is applicable from 1^st Jan’2020.

Now Considering the Challenges facing by organizations due to COVID-19, Relaxation by way of a proviso under Rule 36 Sub-rule 4 has been inserted.

Provision after Relaxation:

As per Central Goods and Services Tax (Fourth Amendment) Rules, 2020,

In the said rules, in sub-rule (4) of rule 36, the following proviso shall be inserted, namely:-

“Provided that the said condition shall apply cumulatively for the period February, March, April, May, June, July and August 2020 and the return in FORM GSTR-3B for the tax period September 2020 shall be furnished with the cumulative adjustment of the input tax credit for the said months in accordance with the condition above.”

Conclusion:

The restriction will be considered cumulatively for the Period of consecutive seven Months starting from Feb’20. That means the limit of 10% provisional credit can be ignored while filing GSTR-3B till August and ITC can be taken on the basis of Invoices available however while filing GSTR-3B for the September month it should be verified that total provisional credit claimed during relaxation period does not exceed in aggregate 10% of Eligible credit.

Example-1:

On the basis of above table, Eligible credit for the seven consecutive months is Rs.5,00,000/- hence maximum provisional credit allowed is Rs.50,000/-.

Total Credit can be availed: Eligible + Provisional Credit (Rs.5,00,000+50,000=Rs.5,50,000)

Note: Earlier it was 20% as per the Notification No. 49/2019 – Central Tax.