This limit has been further reduced to 10% by 38th Council meeting on 18.12.2019.
On 9th October 2019, CBIC (Central Board of indirect Taxes and customs) made various amendments vide notification 49/2019 to various rules, however the one which is most discussed out of all these amendments and the one which we will discuss here is regarding the availability of ITC, invoice of which has not been uploaded by supplier in his GSTR 1 and which is not available in GSTR 2A.
Vide the above notification, CBIC has inserted a sub-rule after sub-rule 3 of rule 36 of Central Goods and Service tax rules, 2017, which is as under:
“ (4) 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.”
According to the above rule it has been made clear that credit for Tax invoices available with you which are not available on GSTR 2A i.e. invoices not uploaded by supplier in his GSTR 1, would be available to you only to the extent of 20% of total credit of all bills available in GSTR 2A. Now let’s understand this with an example:
Let’s say you have bills with total input tax credit of Rs. 1 lakh from various supplier in a month, out of this 1,00,000:
| Particulars | Eligible credit | Ineligible credit | Total |
| Bills uploaded on GST portal | 45,000 | 5,000 | 50,000 |
| Bills not uploaded on GST portal | 40,000 | 10,000 | 50,000 |
| Total credit | 85,000 | 15,000 | 1,00,000 |
Now during this month you have also taken some service on which you are going to pay GST under reverse charge which amounts to Rs. 20,000 and therefore same won’t uploaded on portal by supplier and you can directly take it’s credit by making payment.
So total credit which you must take for the month would be 1,05,000.
However as per the new rule the calculation would be that forget the ineligible credit, now out of the total eligible credit i.e. 85,000 you can take credit of Rs. 54,000 (i.e. 45,000 plus 20% of 45,000). So now credit available would be of the invoices uploaded by supplier on portal and for the invoices not uploaded by supplier you can take credit of such input tax credit or 20% of credit available in GSTR 2A whichever is lower. Therefore, in our case the total credit eligible would be Rs. 74,000 out of total 1,05,000.
This will surely increase the work of a GST practitioner or a CA as now they need to quarterly check the total credit taken with the credit available in GSTR 2A and check the eligible credit as per above calculation. At the same time it’s discouraging for the receiver of goods because before this rule people used to take credit of the entire GST paid by them to the supplier and they would not check whether the supplier has uploaded the invoice on GST portal or not as the receiver has paid proper tax and done his work but now there would be a situation where the receiver of goods would not make payment to supplier till the time invoices are not uploaded on GST portal and this will increase his work and reduce the cycle of business.
Do you think with the new type of returns being applicable from 01.04.2020 and E-invoice this rule would be required in future?
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