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 38th 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 1st 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:

Month Amount Reflected in 2A (Amount) Invoices Available (Amount)
FEB’20                          100,000                       150,000
MAR’20                          150,000                       120,000
APR’20                            50,000                         80,000
MAY’20                            20,000                       100,000
JUN’20                            60,000                         50,000
JUL’20                            70,000                         20,000
AUG’20                            50,000                         70,000
Total                          500,000                       590,000

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.

Author Bio

Qualification: CA in Job / Business
Company: Sameer Mittal & Associates LLP
Location: NEW DELHI, New Delhi, IN
Member Since: 17 Apr 2020 | Total Posts: 4
Experienced in Risk Advisory Services with a demonstrated history of working in the management consulting industry. Skilled in Internal Audit, IFC/ICFR, Indirect Taxation, Direct Taxation, Accounting, and Microsoft Office. Strong information technology professional with a Chartered focused in Busine View Full Profile

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