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 restriction has to be manually followed by the taxpayer i.e., self assessed. The restriction is not through the Portal but the taxpayer needs to manually compute the restricted amount as a percentage of eligible credit in terms of the above provision.
  • The above restriction applies i.r.o invoices / debit notes, details of which are required to be uploaded by the suppliers section 37(1) which have not been uploaded. The credit in respect of IGST paid on import, documents issued under RCM, credit received from ISD etc, may be claimed in full, subject to fulfilment of other eligibility conditions.
  • The restriction of 20% will be effective from 09.10.2019.
  • The credit under new sub rule is linked to total eligible credit from all suppliers against all supplies whose details have been uploaded by the suppliers.
  • Only eligible ITC shall be considered for calculating the 20% restricted credit. Therefore, ineligible credits say under section 17(5) shall not be considered for calculating this 20% amount.
  • The above eligible credit shall be in respect of invoices or debit notes the details of which have been uploaded by the suppliers under section 37(1) of the CGST Act, 2017 and is available in recipient’s GSTR-2A as on the due date of filing of the returns in FORM GSTR 1 of the suppliers for the said tax period.
  • The balance ITC may be claimed by the taxpayer in any of the succeeding months provided details of requisite invoices are uploaded by the suppliers.
  • Full ITC for a tax period can be claimed if the suppliers furnishes invoices the eligible ITC of which is 83.33% (approx. 83%) of the total eligible credit for a tax period. 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 i.e., 83.33%.

input tax credit ITC

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/-

Case No
 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
1 7,00,000.00 70.00% 1,40,000.00 8,40,000 10,00,000 8,40,000
2 7,50,000.00 75.00% 1,50,000.00 9,00,000 10,00,000 9,00,000
3 8,00,000.00 80.00% 1,60,000.00 9,60,000 10,00,000 9,60,000
4 8,33,333.00 83.33%


10,00,000 10,00,000 10,00,000
5 8,50,000.00 85.00% 1,70,000.00 10,20,000 10,00,000 10,00,000

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.

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A Chartered Accountant by Profession, with key attributes being Learning and doing Research. Currently , undergoing specialization in Indirect Taxation and related matters. View Full Profile

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October 2021