Rule 36(4) introduced to provide that:
“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 per cent. 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.”
Implications:
Restriction on availment of ITC upto that reflecting in GSTR 2A + 20%
• Monthly mapping of ITC with GSTR 2A required before filing monthly return in GSTR 3B.
• Is applicable from October 9, 2019 – applicable on return filed for the month of Oct., 2019 in Nov., 2019
• GSTR 2A need to be examined to weed out any ineligible ITC as such ITC would not help in determining
limit.
• Interest implications in case of wrongful availment.
• No Limit applicable on ITC of import and reverse charge
Example of Availment of ITC as per new Rule
| Month | Eligible ITC as per Books | Total ITC as per 2A | Eligible ITC as per 2A | Available ITC | Remarks |
|---|---|---|---|---|---|
| (max: GSTR 2A + 20%) | |||||
| Oct-19 | 1,00,000 | 1,00,000 | 1,00,000 | 1,00,000 | Ideal Scenario |
| Nov-19 | 1,00,000 | 80,000 | 80,000 | 96,000 | Max ITC that can be availed: As per GSTR 2A + 20% |
| Dec-19 | 80,000 | 100,000 | 60,000 | 72,000 | ITC even if higher in GSTR 2A relating to ineligible items like motor vehicle would not provide extra limit to assessee. |
| Jan-20 | 1,00,000 | 1,00,000 | 80,000 | 96,000 | ITC even if higher in GSTR 2A relating to ineligible items like motor vehicle would not provide extra limit to assessee. |
| Feb-20 | 1,00,000 | 75,000 + entry of Nov, 19 ITC of Rs. 10,000 made by supplier in Feb, 20 | 75,000 | 90,000 + 10,000 Nov. ITC | ITC of previous month which was not updated earlier can be availed in subsequent month. However, there shall always be a limit of GSTR 2A ITC for the month +20%. |
| Mar-20 | 1,00,000 | 80,000 | 80,000 | 96,000 + 5,000 I | ITC reversed earlier for non payment within 180 days shall also be availed and be not considered for this limit. |
Challenges in Implementation of 20% rule
Challenges in Implementation of 20% rule
| Month | Eligible ITC as per Books | Total ITC as per 2A | Eligible ITC as per 2A | Available ITC | ITC Availed | Remarks |
|---|---|---|---|---|---|---|
| (max: GSTR 2A + 20%) | ||||||
| Oct-19 | 1,00,000 | 80,000 | 80,000 | 96,000 | 96,000 | Ideal Scenario |
| Nov-19 | 1,00,000 | 1,00,000 | 1,00,000 | 1,00,000 | 1,10,000 | Issue: A supplier filed his return adding another 10,000 to October, 2019 GSTR 2A. Benefit of such addition is availed by the taxpayer in November, 2019. However, if GSTN shall make a comparison for current month, the availment limit shall seem to fail. |
| Dec-19 | 1,00,000 | 150000 (higher ITC on account of purchase of Motor vehicle) | 40,000 | 48,000 | 1,00,000 | Issue: The system shall not be able to find this defaulter as his GSTR 2A total is more than his availed ITC |
| Jan-20 | 1,00,000 | 50,000 | 50,000 | 60,000 | 60,000 | Issue: GSTR 2A did not relfect the ITC of small taxpayers who shall file their return GSTR 1 at quarter end. Thus, with no fault of either side, the ITC is blocked. |
| Feb-20 | 1,00,000 | – | – | – | – | Issue: All purchases from small taxpayers filing quaterly return. This shall cause grave hardship to buyer or he will be focred to stop his purchases from small taxpayers. |
| Mar-20 | 1,00,000 | 80,000 | 80,000 | 96,000 | 1,20,000 | Issue: Credit of ITC of Rs. 30,000 reversed earlier under Section 16(4) (for non payment within 180 days) now availed. However, GSTN cannot differentiate such availment and thus, might lead to issue of notices for wrongful availment. |
