In line with GST Council’s decision of 37th Council meeting on capping input tax credit, sub-rule (4) to rule 36 of the CGST Rules, 2017 has been inserted vide Notification 49/2019 dated 9th October, 2019 which makes it mandatory to review inputs as appearing in GSTR-2A of the taxpayer. It mandates that the taxpayer shall not avail input in excess of 20% of the eligible credit available in GSTR-2A over and above the eligible credit. For achieving this, the taxpayer needs to conduct monthly reconciliation of input with GSTR-2A and then avail the input accordingly (maximum capped to 120% of eligible credit available subject to actual input available) in GSTR-3B.
After notification of this rule, there were ambiguities regarding its application and there were many questions unanswered like –
In order to bring all ambiguities to rest, Central Board of Indirect Taxes and Customs (CBIC) has issued a Circular No. 123/42/2019-GST dated 11th November, 2019. In this circular, CBIC has discussed various issues and their solutions. It has clarified that restriction on input shall not be imposed through common portal and will be the responsibility of the taxpayer to claim restricted input on self-assessment basis.
Further following issues has been clarified by the Circular:
The circular has also provided an illustration regarding application of sub-rule (4) of rule 36 of CGST Rules, 2017. For the sake of uniformity, the same illustration has been produced hereinunder:
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 supplier’s invoices for which recipient is eligible to take ITC||20% of eligible credit where invoices are uploaded||Eligible ITC to be taken in GSTR-3B to be filed by 20th Nov, 2019||When balance ITC can be taken|
|1||Suppliers have furnished 80 invoices in GSTR-1 involving ITC of Rs. 6 lakhs as on the 11th Nov, 2019||Rs. 1,20,000/-||Rs. 7,20,000/- [Rs. 6,00,000/- amount of eligible ITC available as per GSTR-2A + Rs. 1,20,000/- (20% of eligible ITC as per GSTR-2A)]||Balance ITC of Rs. 2.8 lakhs may be taken when the suppliers upload details of some of the invoices for the tax period involving ITC of Rs. 2.3 lakhs out of invoices involving ITC of Rs. 4 lakhs details of which had not been uploaded by the suppliers within 11th Nov, 2019.
[Rs. 6 lakhs + Rs. 2.3 lakhs = Rs. 8.3 lakhs]
|2||Suppliers have furnished 80 invoices in GSTR-1 involving ITC of Rs. 7 lakhs as on the 11th Nov, 2019||Rs. 1,40,000/-||Rs. 8,40,000/- [Rs. 7,00,000/- amount of eligible ITC available as per GSTR-2A + Rs. 1,40,000/- (20% of eligible ITC as per GSTR-2A)]||Balance ITC of Rs. 1.6 lakhs may be taken when the suppliers upload details of some of the invoices for the tax period involving ITC of Rs. 1.3 lakhs out of invoices involving ITC of Rs. 3 lakhs details of which had not been uploaded by the suppliers within 11th Nov, 2019.
[Rs. 7 lakhs + Rs. 1.3 lakhs = Rs. 8.3 lakhs]
|3||Suppliers have furnished 75 invoices in GSTR-1 involving ITC of Rs. 8.5 lakhs as on the 11th Nov, 2019||Rs. 1,70,000/-||Rs. 10,00,000/-
[Rs. 8,50,000/- amount of eligible ITC available as per GSTR-2A + Rs. 1,50,000/- (the additional amount of ITC availed shall be limited to ensure that the total ITC availed does not exceed the total eligible ITC.)]
It may be noted that the balance proportionate ITC may be availed by the taxpayer in any of the succeeding months when the requisite invoices are uploaded by the supplier in their GSTR-1. The proportion of ITC claimed shall be such that that total ITC claimed for the tax period shall not exceed 120% of eligible ITC uploaded by the suppliers. In other words, taxpayer may avail full ITC in respect of a tax period, as and when the invoices are uploaded by the suppliers to the extent Eligible ITC / 1.2 or Eligible ITC / 120%.
In the instant case, the ITC of Rs. 10 lakhs may be claimed by Mr. R as and when his suppliers furnish their GSTR-1 to the tune of Rs. 8.3 lakhs [Rs. 10 lakh / 1.2] tax amount in aggregate. This may be understood as under:
|Month||Invoices uploaded by suppliers involving tax during the month (Rs.)||Eligible ITC for the month (Rs.)||Remarks|
|Oct-19||6,00,000||7,20,000||Rs. 6,00,000/- x 120% not exceeding Rs. 10 lakhs|
|Nov-19||2,00,000||2,40,000||Rs. 2,00,000/- x 120% not exceeding Rs. 10 lakhs|
|Dec-19||1,00,000||40,000||Rs. 1,00,000/- x 120%, however this month the eligible ITC is exceeding Rs. 10 lakhs (as per calculation). Therefore, it should be restricted to Rs. 10 lakhs.|
|Jan-19||75,000||0||As entire amount of Rs. 10 lakhs has been taken. No further ITC shall be availed.|