Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01.04.2019 to 31.12.2021

Circular No.: 193/05/2023-GST
Date of Circular: 17th July 2023
Relevant Sections and Rules:

• CGST Act, 2017:
  • Section 16(2)(c): Conditions for availing Input Tax Credit (ITC)
  • Section 168(1): Power to issue instructions
• CGST Rules, 2017:
  • Rule 36(4): Restriction on ITC based on GSTR-2A/2B mismatch
  • Rule 36(4) Provisos: Cumulative ITC adjustment provisions
  • Rule 37(1): Reversal of ITC if tax not paid by supplier
• Notifications:
  • Notification Nos. 30/2020-CT and 27/2021-CT

Summary of Clarification Provided:

1. Applicability of Circular No. 183/15/2022-GST for FY 2019–20 Onwards:
   The methodology for verifying ITC mismatches between GSTR-3B and GSTR-2A, earlier clarified for FY 2017–18 and 2018–19 in Circular No. 183/15/2022-GST, is now extended to FY 2019–20 (from 01.04.2019) to 31.12.2021, subject to conditions under Rule 36(4) which imposed quantitative caps on ITC not reflected in GSTR-2A.
2. ITC Availment Limits under Rule 36(4) – Period-wise Conditions:

• 01.04.2019 to 08.10.2019: No Rule 36(4) restriction; entire Circular 183/15/2022-GST applies.
• 09.10.2019 to 31.12.2019: 20% additional ITC allowed over matched ITC in GSTR-2A.
• 01.01.2020 to 31.12.2020: 10% additional ITC limit.
• 01.01.2021 to 31.12.2021: 5% additional ITC limit.

In all cases, actual tax payment by the supplier remains a precondition under Section 16(2)(c), even if ITC is otherwise within the allowable limit.

3. Example Clarification (09.10.2019 to 31.12.2019):
   If GSTR-2A shows ₹3,00,000 but GSTR-3B shows ₹5,00,000, then only ₹3,60,000 (3,00,000 + 20%) can be allowed. The excess ₹1,40,000 is ineligible. Even if certifications as per Circular 183 are provided, only ₹60,000 (the 20% buffer) is conditionally admissible.
4. Conditions Post 01.01.2022 – GSTR-2B Binding:
   W.e.f. 01.01.2022, due to insertion of Section 16(2)(aa) and Rule 36(4) amendment, ITC can be claimed only if the invoice is reflected in GSTR-2B. There is no scope for availing unmatched ITC beyond this point.
5. Cumulative Adjustment Provisions for COVID-affected Periods:

• For Feb–Aug 2020, cumulative ITC adjustment allowed in September 2020 return.
• For Apr–Jun 2021, cumulative adjustment allowed in June 2021 return.
  These relaxations must be accounted for while verifying ITC eligibility for those months.

6. Scope and Applicability:
   These clarifications apply only to ongoing audit/scrutiny/investigation cases for 01.04.2019 to 31.12.2021. Not applicable to closed proceedings, but applicable if adjudication or appeal is pending for the said period.

Source: Circular No.: 193/05/2023-GST