Capping of 20% ITC w.r.t invoices/debit-notes not uploaded by supplier in GSTR-1

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The CBIC vide Notification No. 49/2019 – Central Tax dated October 09, 2019, has, inter alia, amended Rule 36 of the CGST Rules, 2017 (“CGST Rules”) which deals with the “Documentary requirements and conditions for claiming Input Tax Credit (“ITC”)”.

A new sub-rule (4) is inserted w.e.f October 9, 2019 which states that a registered person can claim ITC in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers in GSTR-01 (i.e. not getting reflected in Form GSTR-2A) only to the extent of 20% of the eligible credit available in respect of invoices or debit notes, the details of which have been uploaded by the suppliers.

New sub-rule (4) reads as under:

“(4) 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.” 

Our Comments:

The above amendment may bring an incumbent task of regularly matching ITC details of taxpayers with those appearing in his GSTR-2A. Further, Any gaps may have to be resolved with constant follow-ups with the suppliers. Noticeably, the above amendment comes when the New GST Return filing system is postponed w.e.f April 2020, as per the decision taken at the 37th GST Council Meeting. In the new GST Return System, there will be three main components to the new return – one main return (FORM GST RET-1) and two annexures (FORM GST ANX-1 and FORM GST ANX-2). Moreover, the newly proposed Section 43A under the CGST Amendment Act, 2018, which still remains to be made effective, also contain similar capping of 20% ITC under sub-section (4), reproduced as under:

“(4) The procedure for availing input tax credit in respect of outward supplies not furnished under sub-section (3) shall be such as may be prescribed and such procedure may include the maximum amount of the input tax credit which can be so availed, not exceeding twenty percent. of the input tax credit available, on the basis of details furnished by the suppliers under the said sub-section.”

Moreover, while most of the decisions of the 37th GST Council meeting were effective from October 1, 2019, the above changes are applicable from October 9, 2019.