CBIC vide the notification number 49/2019 inserted the new rule 36(4) which deals with the restriction on ITC for the invoices not reflecting in GSTR 2A.

Section 43A has been inserted vide the CGST Amended Act, 2018 which deals with the provision of procedure and furnishing of return which restricts the ITC exceeding 20% of eligible credit for the invoices not reflecting in GSTR 2A. However, this provision is still not in force. Hence, it is a big question on the applicability of the provision of Rule 36(4).

A detailed analysis is hereby given under:

Rule 36(4) provides that

“Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent. of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.”

Further, CBIC issued the circular number 123/42/2019 – CENTRAL TAX to clarify the following various issues relating to the implementation of the aforesaid rule:

  • Eligibility of ITC shall be determined in accordance to Chapter V of the CGST Act and the Rules made thereunder which deals with the input tax credit (Section 16 to 21 of CGST Act, 2017).
  • The restriction as per Rule 36(4) of CGST Rule, 2017 is not imposed through the common portal and it is the responsibility of the taxpayer that the availment of restricted credit shall be done on self-assessment basis by the taxpayers.
  • Other Clarifications are given below:
S.No Issues Clarification Point of Attention/Remarks
1. What are the invoices / debit notes on which the restriction under rule 36(4) of the CGST Rules shall apply? (i.e. Invoices not reflected in GSTR 2A) 1 For the invoices which have not been uploaded by supplier in his GSTR-1 but availed the ITC by recipient in his books of account.

2.  However, the taxpayers may avail full ITC in respect of IGST paid on import, documents issued under RCM, credit received from ISD subject to eligibility of ITC.

3. The restriction is applicable only on the invoices/debit notes on which ITC availed after  09.10.2019.

2. Whether the said restriction is to be calculated supplier wise or on consolidated basis? 1. The restriction is not imposed supplier wise.

2. The credit available under rule 36(4) is linked to total eligible credit from all suppliers against all supplies reflected in GSTR 2A.

3. FORM GSTR-2A being a dynamic document, what would be the amount of ITC that is admissible to the taxpayers for a particular tax period in respect of invoices / debit notes whose details have not been uploaded by the suppliers? 1. The amount of ITC that is admissible to the taxpayers shall not exceed 20% of eligible credit of the invoices reflected in GSTR 2A as on the due date of filing of GSTR-1 for the tax period.

2. Any ineligible ITC will not be considered for calculating 20% of the eligible credit available.

Eligibility of ITC shall be determine as per section 16(2), 17 of CGST Act.

Presently, Return filed date by supplier is not reflecting in GSTR 2A.

4. When can balance ITC be claimed in case availment of ITC is restricted as per the provisions of rule 36(4)? 1. The balance ITC may be claimed by the taxpayer in any of the succeeding months provided the same is reflected in GSTR 2A.

2. He can claim proportionate ITC as and when details of some invoices are uploaded by the suppliers provided that credit on invoices, the details of which are not uploaded remains under 20% of the eligible ITC, uploaded by the suppliers.

Whether the ITC can be claimed after Sept following the end of FY to which invoice pertains?

No, Circular cannot override the parent statue.

5. Eligible ITC as recorded in books tallying with the invoices as reflected in GSTR 2A 100% ITC allowed
6. Invoices Reflected in GSTR 2A but not availed the ITC in books of account due to reasons like:

a) Supplies received in next month.

b) Invoices & Supplies received in same month but accounting is pending

Section 16(2) provides that ITC can be claim after the receipt of invoice & supplies.

100% ITC can be claimed in next month.

The tax payer should ensure timely booking of invoices in books of account to claim ITC thereon.

7 Invoices reflected in both GSTR 2A & Books of account but difference in value:

a) Value excess in Book over GSTR 2A

b) Value short in books over GSTR 2A

20% of the amount of eligible ITC available, as per details uploaded by the supplier.

100% ITC allowed as per books of account.

Comments:

1. CBIC introduce the new section 43A through CGST Amendment Act, 2018 which deals with the procedure for furnishing return and availing ITC. Till date, section 43A is not in force. Therefore, the aforesaid provision prescribed under Rule 36(4) may not be effective till section 43A notified.

2. This provision shall be applicable for Oct’2019 tax period & onwards i.e. return filed in month of Nov’2019 & onwards. 

3. GSTR 2A shall be consider as available on the due date of filing of FORRM GSTR-1 under section 37(1) of CGST Act. However, GSTR 2A is not showing the date of filing of GSTR-1 by suppliers. 

4. ITC for the invoices or debit notes have not been uploaded by suppliers shall not exceed 20% of the eligible credit available in respect of invoices or debit notes uploaded by the suppliers. So, while computing 20%, the assessee has to compute the eligible credit of ITC on the basis of GSTR 2A.

5. For computing the eligible credit, the following may be considered as ineligible credit:

a) Credit restricted u/s 17(5).

b) Inwards Supplies used exclusively in providing the exempt supply.

c) Inward Supplies partly used for exempt supply.

d) Inward Supplies partly used for non-business purpose.

6. Manner of Reconciliation:

a) First, identify the invoices or debit notes as reflected in both GSTR 2A & Purchase Register.

b) Thereafter, following shall be pending to reconcile;

a. Invoices or debit notes reflecting in GSTR 2A but credit not availed in GSTR 3B either due to compliance of section 16 or invoices not related to the taxpayer, etc.

b. Invoices or debit notes for which ITC to be availed in GSTR 3B but invoices or debit notes are not reflecting in GSTR 2A.

c) Rule 36(4) deals with the second scenario as discussed above.

d) For such a scenario, ITC shall be available to the extent of 20% of eligible credit available, as per the details uploaded by the supplier.

Let us illustrate;

Particulars Amount
Invoices reflecting in GSTR 2A A 2,00,000/-
Debit notes as reflecting in GSTR 2A B    40,000/-
Credit notes as reflecting in GSTR 2A C    20,000/-
Total Credit as per GSTR 2A D=A+B-C 2,20,000/-
Invoices or debit notes that matches with GSTR 2A E 1,35,000/-
Invoices or debit notes found in GSTR 2A but credit can be availed in next tax periods in compliance with section 16 F 25,000/-
Invoices or debit notes found in GSTR 2A but the ITC skip to availed in respective tax period. G 60,000/-
Invoices or debit notes as reflecting in GSTR 2A but not related to taxpayer H 20,000/-
Total of (E+F+G+H) = (A+B) 2,40,000/-
Common ITC attributed to exempt supply out of E & G I 10,000/-
Credit restricted under section 17(5) out of E & G J 10,000/-
Credit attributed to non-business purpose out of E &G K 12,000/-
Credit attributed to used exclusively for exempt supply out of E & G L 13,000/-
Eligible Credit (E+G-I-J-K-L) M 1,50,000/-
20% of Eligible Credit (M*20%) N 30,000/-
Invoices or debit notes not found in GSTR 2A but the invoices and goods received during tax periods (May be QTRLY filers etc.) O 60,000/-
Credit can be availed for point N or O, whichever is lower P 30,000/-
Total Gross ITC can be availed (E+G+P) 2,25,000/-

Clarification Required From CBIC;

a) As per circular, GSTR 2A shall be consider as available on the due date of filing of FORRM GSTR-1 under section 37(1) of CGST Act. However, GSTR 2A is not showing the date of filing of GSTR-1 by suppliers.

b) In case the supplier filed the return on later date say after 6 months or made the amendments in original supply, it will auto-populate in the respective tax period. In such case, how to compute 20% of eligible credit?

c) Where the invoices as reflected in GSTR 2A of M1 but the taxpayer is eligible to avail the ITC in M2, whether the taxpayers consider such supplies for the computation of 20% of uploaded invoices in M2.

d) As per the recent circular, taxpayers need to compute the 20% of eligible credit on a consolidated basis instead of supplier wise. The taxpayers availed the ITC to the extent of 20% of eligible credit for the invoices not reflecting in GSTR 2A and the balance ITC can be availed as and when the invoices uploaded by the supplier. Whether such balance ITC can be claimed in the subsequent month even not uploaded by the supplier but accumulated ITC on account of invoices not reflected in GSTR 2A is in the limit of 20% of eligible credit of subsequent month?

e) Whether the ITC shall lapse in case the supplier has not uploaded the invoices in his GSTR-1 till the last date of uploading the invoices being September following the end of FY to which invoices pertains?

f) How to compute the eligible credit, where it is unknown about the distribution of goods by way of sample or gift etc.

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2 Comments

  1. Saurav Jha says:

    Good work tarun.
    but whats your view on a situation when credit appearing in 2A as well as books for IGST is Rs. 10000/-
    but no ITC is appearing in 2A for CGST/SGST amounting to Rs. 20000+20000.

    1. TARUN GARG says:

      This new rule is inserted under CGST Rule 2017 and correspondingly in SGST Rule also.
      Therefore, this rule should apply individually to each type of taxes.
      However, this provision already creates number of hurdles practically and no further clarification issued by CBIC. Hence, to my view, we should compute the 20% in totality instead separately to each type of GST.

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