CBIC clarification w.r.t. 20% ITC restriction on invoices/debit-notes not uploaded by supplier in GSTR-1

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Background:

The CBIC, vide Notification No. 49/2019 – Central Tax dated October 9, 2019, had, inter alia, inserted a new sub-rule (4) to Rule 36 of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”) 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.

Clarification by the CBIC:

Considering the various issues in implementation of the said rule, the CBIC has issued Circular No. 123/42/2019 – GST dated November 11th, 2019 (“the Circular”) which intends to clarify as to how the new sub-rule shall be applied towards calculation of ITC eligible for availment.

  • Restriction on credit availment applicable on self-assessment basis

Importantly, it has been clarified that:

  • ITC that may be availed by the recipient shall continue to be governed as per the provisions of Chapter V of the CGST Act and the rules made thereunder.
  • This being a new provision, the restriction is not imposed through the common portal and it is the responsibility of the taxpayer that credit is availed in terms of the said rule.
  • Therefore, the availment of restricted credit in terms of Rule 36(4) of CGST Rules shall be done on self-assessment basis by the tax payers.

  • Other clarifications

S.No

Issue

Clarification

1.

What are the invoices/ debit notes on which the restriction under Rule 36(4) of the CGST Rules shall apply?

  • ITC restriction under Rule 36(4) is applicable only on the invoices/debit notes on which credit is availed after October 9, 2019.
  • Taxpayers may avail full ITC in respect of IGST paid on import, documents issued under RCM, credit received from ISD etc. which are outside the ambit of Section 37(1), if eligibility conditions for availment of ITC are otherwise met.

2.

Whether the said restriction is to be calculated supplier wise or on consolidated basis?

  • The restriction imposed is not supplier wise.
  • ITC available is linked to total eligible credit from all suppliers against all supplies whose details have been uploaded by the suppliers.
  • The calculation would be based on only those invoices which are otherwise eligible for ITC.
  • Those invoices on which ITC is not available under any provision [for eg: Section 17(5)] would not be considered for calculating 20% of the eligible credit available.

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?

  • Restriction of 20% is to be reckoned as on the due date of filing of returns in FORM GSTR-1 of the suppliers for the said tax period.
  • Taxpayer may have to ascertain the same from his auto populated FORM GSTR 2A as available on the due date of filing of FORM GSTR-1 under Section 37(1).

4.

How much ITC a registered taxpayer can avail in his FORM GSTR-3B in a month in case the details of some of the invoices have not been uploaded by the suppliers under Section 37(1).

The calculations can be understood through the tabulated illustrations below where say a taxpayer “R” 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.

 

Cases

Details of suppliers’ invoices for which recipient is eligible to take ITC

20% of eligible credit where invoices are uploaded

Eligible ITC to be taken in GSTR-3B to be filed by 20th Nov

Case 1

Suppliers have furnished in FORM GSTR-1, 80 invoices involving ITC of Rs. 6 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers.

Rs. 1,20,000/-

Rs. 7,20,000/-

[Rs. 6,00,000 (i.e. amount of eligible ITC available, as per details uploaded by the suppliers) + Rs. 1,20,000 (i.e. 20% of amount of eligible ITC available, as per details uploaded by the suppliers)]

Case 2

Suppliers have furnished in FORM GSTR-1, 80 invoices involving ITC of Rs. 7 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers.

Rs. 1,40,000/-

Rs. 8,40,000/-

[Rs 7,00,000 + Rs. 1,40,000]

Case 3

Suppliers have furnished in FORM GSTR-1, 75 invoices having ITC of Rs. 8.5 lakhs as on the due date of furnishing of the details of outward supplies by the suppliers

Rs. 1,70,000/-

Rs. 10,00,000/-

[Rs. 8,50,000/- + Rs. 1,50,000/-*]

* The additional amount of ITC availed shall be limited to ensure that the total ITC availed does not exceed the total eligible ITC

5.

When can balance ITC be claimed in case availment of ITC is restricted as per the provisions of Rule 36(4)?

  • Balance ITC be claimed by the taxpayer in any of the succeeding months provided details of requisite invoices are uploaded by the suppliers.
  • Proportionate ITC may be claimed 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.
  • 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/ 1.20
  • The same is explained for Case No. 1 and 2 of the illustrations provided above as under:

 

Case 1

“R” may avail balance ITC of Rs. 2.8 lakhs in case suppliers upload details of some of the invoices for the tax period involving ITC of Rs. 2.3 lakhs out of invoices involving ITC of Rs. 4 lakhs details of which had not been uploaded by the suppliers. [Rs. 6 lakhs + Rs. 2.3 lakhs = Rs. 8.3 lakhs]

Case 2

“R” may avail balance ITC of Rs. 1.6 lakhs in case suppliers upload details of some of the invoices involving ITC of Rs. 1.3 lakhs out of outstanding invoices involving Rs. 3 lakhs. [Rs. 7 lakhs + Rs. 1.3 lakhs = Rs. 8.3 lakhs]