CBIC has inserted a new sub-rule (4) to Rule 36 with effect from 09.10.2019, which reads as follows:
‘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 percent. 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 to clarify the applicability of the provision, the Government issued circular No.123/42/2019-GST dated 11th November 2019, which has been summarized below for easy understanding:
The above point is explained herewith an example for better understanding. Say,
Total ITC : Rs. 10,10,000/-
Total eligible ITC : Rs. 10,00,000/-
Total ineligible ITC : Rs. 10,000/-
| Eligible Credit as per GSTR-2A
| Percentage of total eligible credit as per GSTR-2A
(c = b/f)
| 20% of eligible credit filed
(d=20% of b)
|Total Credit available as per Rule
(e = b+d)
|Total Credit available as per BoA
| Net credit available for the month
Thus, it can be seen from case 4 and case 5, that once the percentage of total eligible credit reaches 83.33% or above, the maximum amount of credit available for the said tax period is nothing but the full amount of eligible ITC for that tax period.
The new rule 36(4) restricts the ITC which is not showing in GSTR-2A as a percentage of ITC which is reflected in GSTR-2A. It is very clear that due to this circular a new type of hassle will increase for taxpayers as well as professionals also.
The logic behind this new sub-rule 36(4) can be a step to prevent fake billing or wrongful claim of ITC and to prevent the revenue from incurring huge losses due to these loops. Certainly, it is going to be a roller coaster ride for for the recipients who will have to chase the suppliers for filing their GSTR-1, so that the recipient can claim maximum available & eligible ITC.
Disclaimer: The views, expressions, opinion is solely an interpretation of the author and does not assures of the correctness of interpretation. The author reserves the right not to be responsible for the topicality, correctness, completeness or quality of the information provided above in this article.