CBIC has issued Circular No. 123/42/2019–GST dated 11th November 2019 clarifying Restriction in availment of input tax credit in terms of sub-rule (4) of rule 36 of CGST Rules, 2017.

The key summary of the circular has been given below for easy understanding:

  1. This is a clarification to the Notification No 49/2019-Central Tax dated 9th October 2019 and should be read in consonance with the said Circular.
  2. The restriction does not apply to the following category of Input Tax Credits
  3. IGST Paid on Imports
  4. ITC availed for documents issued under RCM
  5. Credits received from Input Service Distributor (ISD)
  6. The restriction is only against ITC availed on invoices/debit notes after 9th October 2019 and not before that period.
  7. The GSTN Common Portal shall not put any system restriction based on the above circular. The restriction is to be computed on self-assessment basis.
  8. All other conditions and eligibility for availing ITC shall be governed by CGST Act, 2017 (Chapter – V) and Rules made thereunder. This being an additional condition for availment of credit.
  9. Restriction shall not apply for each supplier but shall be on consolidated value of invoices (i.e. total value of invoices not on count of suppliers)
  10. ITC shall not get lapsed if ITC is not availed in Current month/period but same may be availed in subsequent month/period. However, care must be taken to avail the same within the time period specified as per CGST Act, 2017 and Rules made thereunder.
  11. The taxpayer may have to ascertain the eligible ITC based on auto populated FORM GSTR 2A as available on the due date of filing of FORM GSTR-1 under sub-section (1) of section 37. Hence, if supplier delays in filing GSTR 1 beyond due date, ITC may not be available and same may have to be restricted at 20% of the eligible ITC available as per GSTR 2A.
  12. GSTR 2A being a dynamic document, taxpayers have to down load GSTR 2A on due date of filing GSTR 1 by suppliers (i.e. 11th of subsequent month for suppliers who file monthly return and 31st January 2020 (for Oct to Dec 2019) & 30th April 2020 (for Jan to Mar 2020).
  13. At any time the total ITC availed (Auto Populated as per GSTR 2A and 20% of those auto populated one) should not exceed total eligible ITC of the taxpayer (Refer to illustrations).

What Businesses should do to align with the changes –

  1. Categorize suppliers in monthly or quarterly filing
  2. Request all suppliers to file the returns within due date
  3. Download GSTR 2A on expiry of due date of filing GSTR 1 of suppliers
  4. Ascertain eligible invoices (do not consider ITC on invoices which are not eligible for availing ITC i.e. ineligible ITC invoices, Invoices for suppliers used for making exempt supplies, invoices which is not reported by suppliers in their GSTR 1)
  5. Reconcile the ITC as per books and GSTR 2A monthly/Quarterly for complying with the amended conditions

Illustration to explain the restriction and how it works  –

  • A taxpayer “R” receives 100 invoices (for inward supply of goods or services) involving ITC of Rs. 10 lakhs, from various suppliers during the month of Oct, 2019 and has to claim ITC in his FORM GSTR-3B of October, to be filed by 20th Nov, 2019.
Scenario Details of suppliers’ invoices for which recipient is eligible to take ITC 20% of eligible credit where invoices are uploaded Eligible ITC to be taken in GSTR3B to be filed by 20th Nov.
Case 1 Suppliers have furnished in FORM GSTR-1 80 invoices involving ITC of Rs. 6 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers. Rs 1,20,000 (20% of Rs 6 Lakhs) Rs. 6,00,000 (i.e. amount of eligible ITC available, as per details uploaded by the suppliers) + Rs.1,20,000 (i.e. 20% of amount of eligible ITC available, as per details uploaded by the suppliers) = Rs. 7,20,000/-
Case 2 Suppliers have furnished in FORM GSTR-1 80 invoices involving ITC of Rs. 7 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers. Rs 1,40,000 (20% of Rs 7 Lakhs) Rs 7,00,000 + Rs. 1,40,000 = Rs. 8,40,000/-
Case 3 Suppliers have furnished in FORM GSTR-1 75 invoices having ITC of Rs. 8.5 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers Rs 1,70,000 (20% of Rs 8.50 Lakhs) Rs. 8,50,000/- + Rs.1,50,000/-* = Rs. 10,00,000

* The additional amount of ITC availed shall be limited to ensure that the total ITC availed does not exceed the total eligible ITC.

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Disclaimer: The content of this document is for general information purpose only. TaxMarvel shall not accept any liability for any decision taken based on the advice. You should carefully study the situation before taking any decision.

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  1. Ambika says:

    The invoices of Regtd. Input Service Distributor, who is filing returns quarterly, is not reflecting in GSTR2A. How can I avail ITC on those Invoices?

    1. fcsrohit says:

      Hi Ambika,

      Same shall be claimed by filing GSTR 6 and the entries shall auto populate in GSTR 6A. The above restriction does not apply to Credits pertaining to ISD Credits.

    2. S S N MURTY says:

      We have done Import in the month of July 2017 and wwe got out firm registered with GST in Aug’2017.
      I heard that we can avail IGST paid on imports and request you to clarify and provide the circular no.

  2. P SRINIVAS says:

    We are dealing with Govt civil works contracts and the department people are deducting GST TDS @ 2% on work done. Shall we take it as input tax credit. since they are deducting the TDS for Oct 18 FY 2018-19 and 2019-20. But it is not showing in our 2A, Please clarify sir.

    1. fcsrohit says:

      Dear Sir,

      The GST TDS Deducted has to be claimed by filing GSTR 7. you may follow below path for viewing your TDS Credit –

      Dashboard – Services – Returns – TDS and TCS Credit Receivable – proceed to view and confirm your TDS Credit

      We may assist you in claiming your TDS Credit. You may call me at 9503031788 or mail me at fcsrohit@gmail.com



    1. fcsrohit says:

      Hello sir,

      If the IGST paid on imports is an eligible Credit, you may claim same via your GSTR 3B (ITC table). You need to pay IGST on Imports and same may be availed as ITC

  3. Sham Sunder Gupta says:

    Will this make the ITC unavailable for the dealers, whose suppliers are filing quarterly GSTR-1? In such cases, the dealer will be able to take ITC claim for Oct. – Dec. 2019, after the supplier has filed the GSTR-1 (by 31st Jan. 2020), only in Feb. 2020 while filing GSTR-3B for Jan. 2020. Sir, please clarify.

    1. Rohit Kumar says:

      Dear Sir, such clarification is awaited. But you may still claim ITC provided such quarterly filing value of invoices fall within 20% limit. Ask the supplier to upload the invoices and save the return. Such invoices shall reflect in your 2A.

      1. Sham Sunder Gupta says:

        It looks impractical. The GST Portal either needs to freeze the data at the end of due date of filing of GSTR-1 or provide the date of uploading/filing of the return. Further its difficult for the dealer, to judge the due date of GSTR-1 of the supplier.

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