Restrictions in availment of GST input tax credit

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

The GST rules has been amended w.e.f 9th October 2019, that the ITC credits will be restricted to the those invoices which are appearing in the GSTR 2A of the assesee. However a provisional credit of invoices not appearing in the GSTR 2A will be available to the extent of 20% of total Invoice value which are available in GSTR 2A.

An illustration is as follows

CBIC has issued  Circular No. 123/42/2019–GST dated 11th November 2019 clarifyied the following point in this regard:

1. The restriction does not apply to the following category of  Input Tax credits

1. IGST Paid on Imports
2. ITC availed for documents issued under RCM
3. Credits received from Input Service Distributor (ISD).

1. The restriction is only against ITC availed on invoices/debit notes after 9th October 2019 and not before that period.
2. The restriction is to be computed on self-assessment basis and the Common Portal shall not put any system restriction
3. This is an additional condition for availment of credit, All other conditions and eligibility for availing ITC shall be governed by  CGST Act 2017 and Rules made thereunder.
4. 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)
5. It has been made sure that the ITC has be availed within the time frame specified as per CGST Act, 2017 and Rules made thereunder.( before the due date of filing September  GSTR 3b of the succeeding FY).
6. 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.
7. 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).

Steps  to be followed to claim the ITC as per law:

1. Categorize suppliers in monthly or quarterly filing
2. Request all suppliers to file the returns within due date
3. Download GSTR 2A on expiry of due date of filing GSTR 1 of suppliers
4. 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)
5. Reconcile the ITC as per books and GSTR 2A monthly/Quarterly for complying with the amended conditions