Non filing of GSTR1 – Restriction on ITC claim upto 20% with Example
In some cases, it came to the notice of department that some of the assesses were taking wrong input tax credit without any proper documentation and declaration, simultaneously invoices corresponding to that ITC were not reflected in GSTR2A due to non filing of GSTR-1 by seller. For curtailing this wrong practice, government introduced a new provision, which restrict the ITC availment upto 20% of eligible Input Tax credit. Lets understand this provision in detail:
Input tax credit means the tax paid on the purchase of goods and services and same can be set off against tax liability on goods and services sold. Now one scenario may arises that set off of Input Tax credit has been taken by purchaser on the basis of Tax invoices issued by seller, but seller did not pay taxes to the government, here government would lose revenue. Hence, it became necessary to introduce a mechanism where purchaser will get the credit only when taxes were paid by seller to government.
For resolving above mention issue, government introduced a new sub rule 36(4) through notification No. 49/2019, In this article we will try to simplify the provision related with GST Credit availment.
As per this rule, a taxpayer shall avail Input Tax Credit for those invoices and debit note which have been uploaded by seller in GSTR-1 and reflected in GSTR-2A. Than what will happen with Input Tax Credit for those Invoices and debit note which have not been uploaded by seller, this rule clarify that taxpayer may avail credit upto max 20% of eligible credit for those invoices which have not been uploaded by seller while filing GSTR-3B.
This being a new provision, the restriction is not imposed through GST common portal, but it will be based on the self-assessment basis; it will be the responsibility of the taxpayer to avail credit in terms of rule 36(4).
But please note if taxpayer avails credit in contravention of Rule 36(4), than department may issue a notice for the same, and credit may be denied by the department which it found wrongly taken by taxpayer.
What are the invoices/ debit note on which restriction under rule 36(4) of the CGST rules shall apply?
Restriction which is imposed under this rule is applicable on only those invoices which are required to be uploaded in GSTR1 but have not been uploaded. Therefore, taxpayer may avail full ITC in respect of the following:
- IGST paid on Import,
- Documents issued under Reverse Charge Mechanism (RCM),
- Credit received from Input Service Distributor ( ISD)
Note: The restriction of Rule 36(4) will be applicable only on the invoices/ debit on which credit is availed after 09.10.2019.
Whether the restriction mentioned under rule 36(4) is to be calculated supplier wise or on consolidated basis?
No, the restriction is absolutely not supplier wise; rather it is on consolidated basis. For the purpose of calculation of eligible credit, all the invoices/debit notes uploaded by supplier of goods and services in GSTR1 will be considered. Lets understand it step wise:
- GSTR-1 will be filed by multiple suppliers, in which details of invoices/debit note is uploaded
- Same will be reflected in GSTR-2A of Taxpayer.
- Now, for the purpose of calculation of eligible ITC those invoices/debit notes will be removed on which ITC is not admissible under any provision. For example: Sec. 17(5) contains some cases where Input Tax Credit cannot be availed under GST.
- Last but not the least, calculate 20% of the eligible credit for those bill/ debit note which have been uploaded by seller in GSTR-1.
CASES WITH EXAMPLE:
Mr. Vihaan Gupta receives 100 invoices (for inward supply of goods and services) involving ITC of Rs. 10 Lakhs, from various suppliers for the month of Oct’2019 and has to claim ITC in his FORM GSTR-3B of October, to be filed by 20th Nov, 2019.
Case-1 : Supplier have furnished in FORM GSTR-1, 80 invoices involving ITC of Rs. 6 Lakhs as on the date of furnishing of the details of outward supply by the supplier.
Eligible Credit = 6 Lakhs
20% of eligible credit = 6 Lakhs X 20% = 1,20,000
Eligible ITC to be taken in GSTR 3B filed on 20th Nov, 19 = 6,00,000 + 1,20,000=7,20,000
Case-2: Supplier have furnished in FORM GSTR-1, 80 invoices involving ITC of Rs. 7 Lakhs as on the date of furnishing of the details of outward supply by the supplier.
Eligible Credit = 7 Lakhs
20% of eligible credit = 7 Lakhs X 20% = 1,40,000
Eligible ITC to be taken in GSTR 3B filed on 20th Nov, 19 = 7,00,000 + 1,40,000=8,40,000
Case-3: Supplier have furnished in FORM GSTR-1, 75 invoices involving ITC of Rs. 8.5 Lakhs as on the date of furnishing of the details of outward supply by the supplier.
Eligible Credit = 8.5 Lakhs
20% of eligible credit = 8.5 Lakhs X 20% = 1,70,000
Eligible ITC to be taken in GSTR 3B filed on 20th Nov, 19 = 8,50,000 + 1,70,000= 10,20,000 which will be restricted to 10,00,000
Note: The additional amount of ITC availed shall be limited to ensure that the total ITC availed does not exceed the total eligible ITC.
When can balance ITC be claimed in case availment of ITC is restricted as per the provisions of rule 36(4)?
The balance ITC may be claimed by the taxpayer in any of the succeeding months provided details of requisite invoices is uploaded by supplier in GSTR-1 and same is reflected in GSTR-2A of taxpayer. Lets, understand it by extending the above cases :
Mr. Vihaan Gupta 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]
Mr. Vihaan Gupta 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].
Author of this article is CA Arti Agarwal. She is a practicing Chartered Accountant, and also a prominent author of efilingworld.If you are having any query regarding GST, you can send your query on firstname.lastname@example.org or whatsapp on 8126-416-416.