GST - Restriction in availment of GST input tax credit under CGST Rules, 2017

The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 123/42/2019– GST dated 11th November 2019 (F. No. CBEC – 20/06/14/2019 – GST) clarifying Restriction in availment of input tax credit in terms of sub-rule (4) of rule 36 of CGST Rules, 2017.

The key summary of the circular has been given below for easy understanding:

• This is a clarification to the Notification No 49/2019-Central Tax dated 9th October 2019 and should be read in consonance with the said Circular.
• The restriction does not apply to the following category of Input Tax Credits
• IGST Paid on Imports
• ITC availed for documents issued under RCM
• Credits received from Input Service Distributor (ISD)
• The restriction is only against ITC availed on invoices/debit notes after 9th October 2019 and not before that period.
• The GSTN Common Portal shall not put any system restriction based on the above circular. The restriction is to be computed on self-assessment basis.
• All other conditions and eligibility for availing ITC shall be governed by CGST Act, 2017 (Chapter – V) and Rules made thereunder. This being an additional condition for availment of credit.
• Restriction shall not apply for each supplier but shall be on consolidated value of invoices (i.e. total value of invoices not on count of suppliers)
• ITC shall not get lapsed if ITC is not availed in Current month/period but same may be availed in subsequent month/period. However, care must be taken to avail the same within the time period specified as per CGST Act, 2017 and Rules made thereunder.
• The taxpayer may have to ascertain the eligible ITC based on auto populated FORM GSTR 2A as available on the due date of filing of FORM GSTR-1 under sub-section (1) of section 37. Hence, if supplier delays in filing GSTR 1 beyond due date, ITC may not be available and same may have to be restricted at 20% of the eligible ITC available as per GSTR 2A.
• GSTR 2A being a dynamic document, taxpayers have to down load GSTR 2A on due date of filing GSTR 1 by suppliers (i.e. 11th of subsequent month for suppliers who file monthly return and 31st January 2020 (for Oct to Dec 2019) & 30th April 2020 (for Jan to Mar 2020).
• At any time the total ITC availed (Auto Populated as per GSTR 2A and 20% of those auto populated one) should not exceed total eligible ITC of the taxpayer (Refer to illustrations).

What Businesses should do to align with the changes -

• Categorize suppliers in monthly or quarterly filing
• Request all suppliers to file the returns within due date
• Download GSTR 2A on expiry of due date of filing GSTR 1 of suppliers
• Ascertain eligible invoices (do not consider ITC on invoices which are not eligible for availing ITC i.e. ineligible ITC invoices, Invoices for suppliers used for making exempt supplies, invoices which is not reported by suppliers in their GSTR 1)
• Reconcile the ITC as per books and GSTR 2A monthly/Quarterly  for complying with the amended conditions

Illustration to explain the restriction and how it works  –

• 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.