Restriction on Claim of ITC by Taxpayers
14 November 2019
Restriction On Claim Of ITC By Taxpayers
Central Government inserted new rule 36(4) in CGST rules, 2017, through notification no. 49/2019-Central tax, to restrict the claim of ITC by taxpayers which is not reflecting in GSTR-2A, in cases where the relevant invoices are not uploaded by the vendors in their respective GSTR-1.
RESTRICTION ON CLAIM OF ITC BY TAXPAYERS
Central Government inserted new rule 36(4) in CGST rules, 2017, through notification no. 49/2019-Central tax, to restrict the claim of ITC by taxpayers which is not reflecting in GSTR-2A, in cases where the relevant invoices are not uploaded by the vendors in their respective GSTR-1. The taxpayer shall be eligible to claim 120% of the eligible ITC reflecting in GSTR-2A as uploaded by the vendors in their respective GSTR-1. This rule shall be applicable from 9th October, 2019 onwards.
To clarify the various issues regarding the notification no. 49/2019 dated October 9, 2019 Central Government has issued circular no. 123/2019 dated ….which states 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. Due to this, taxpayers has to monthly reconcile their Input tax credit with the eligible input reflecting in GSTR-2A by keeping in mind the below mentioned points:
- The restriction of availing of ITC is only applicable on those invoices/debit notes which are required to be uploaded by the supplier in GSTR-1,so the taxpayer can avail ITC on IGST paid on imports, documents issued under RCM, credit received from ISD without any restrictions;
- The restriction on ITC is applicable only on the invoices /debit notes on which credit is availed after October 9, 2019. So the taxpayers must, before filing the GSTR-3B for the month of Oct’19, reconcile the ITC with the ITC available in GSTR-2A;
- The restriction on ITC imposed is not to be calculated supplier wise but on total eligible credit from all the suppliers against all the supplies whose details has been uploaded by suppliers.
- The calculation will be on the basis of invoice which are eligible for ITC. According to this, ITC falling under the category blocked and ineligible credits GSTR-2A shall not be considered for calculating 120% of the eligible credit in GSTR-2A;
- The rule restricts ITC claim beyond 120% of eligible ITC forming part of GSTR-2A;
ILLUSTRATION for your better understanding:
In the illustrations, say a taxpayer 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.
Link to original notification and circular is mentioned below-
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