Input Tax Credit Rule

Sub-rule 4 of Rule 36

• As per the new sub-rule (4) inserted in rule 36 of the Central Goods and Service Tax Rules, 2017, a taxpayer filing GSTR-3B can claim provisional Input Tax Credit (ITC) only to the extent of 10% of the eligible credit available in GSTR-2A.

• The ITC claim was earlier restricted to 20% for the period from 9 Oct 2019 till 31 Dec 2019. The new percentage applies from 1 Jan 2020 onwards only.

• The Tax payer should compare ITC in his books with ITC in GSTR 2A. ITC reflecting in GSTR 2A shall be considered as eligible ITC that can be claimed.

• The provisional ITC amount will be restricted only to the extent of 10%* of the eligible ITC value already reflected in the GSTR-2A for that period. 

• Apart from the 10%* of eligible ITC which a taxpayer can claim as provisional credit, the balance tax liability will need to be paid in cash.

• Say ITC available as per purchase register = Rs 1,00,000/-
  • But ITC available as per GSTR 2A= Rs 70,000/-
  • ITC that can be availed = 70,000+ 10% of 70,000 =Rs. 77,000/-
  • ITC not allowed for that month = Rs. 1,00,000-77000= Rs. 23,000/-

• The balance ITC that has not been claimed as provisional ITC may be claimed in the succeeding months once details have been actually uploaded by the suppliers.

• If a supplier has only uploaded part of the pending invoices in a later period, the taxpayer will be able to claim ITC only proportional up to 10% of these pending invoices uploaded. Say out of balance 23,000/- invoices for 20,000 have been uploaded by supplier next month , the recipient shall take credit for 20,000+ 10% of 20,000 = 22,000/- and balance 1,000/- shall still be left to be claimed.

• But in NO CASE the recipient shall claim excess ITC that was entitled to claim.