Notification no. 49/2019 - central tax dated 09-10-2019

The CBIC, vide Notification No. 49/2019 – Central Tax dated October 9, 2019, had, inter alia, inserted a new sub-rule (4) to Rule 36 of the Central Goods and Services Tax Rules, 2017  which states that a registered person can claim maximum 20% ITC from the eligible credit available in GSTR 2A against those invoices or debit notes which is not filed by their supplier in GSTR 1 (which means Invoices or Debit notes not showing in GSTR 2A).

Example: Mr. A buys his raw material from supplier 1 for Rs. 50000 @ 18%. and in the same month Mr. A buys another raw material from supplier 2 for Rs. 100000 @ 18%.

Mr. A check his GSTR 2A and finds that supplier 1 has filed his GSTR 1, this is why GSTR 2A is showing Elegible GST ITC while details of supplier 2 is not showing in GSTR 2A. It means supplier 2 must have not filed his GSTR 1.

Now Mr. A calculate his total claimable ITC as follows.

50000 x 18% = 9000 ITC Claimable
Additional ITC Claimable Against invoice not reflecting in GSTR 2A : 9000x20%=1800

Total ITC Claimable is 10800

After 3 months supplier file his GSTR1 and it is shown in GSTR 2A of Mr. A. Now Mr. A can claim ITC is 1000000 x 18% = 18000-1800=16200.

According to me it is advisable not to claim additional 20% but to pressurize the suppliers to file their GSTR 1 by reconciling book with GSTR 2A on monthly basis.

This is against logic, why GST Department allows 20% of available elegible ITC to claim while department should give option to claim 20% of those invoices which is in possession but not reflecting in GSTR 2A.

Since GST portal is not that much developed to restrict ITC amount upto 120% of ITC available in GSTR 2A, hence self assessment opportunity is given to tax payers.

Clarification by the CBIC:

Considering the various issues in implementation of the said rule, the CBIC has issued Circular No. 123/42/2019 – GST dated November 11th, 2019 (the Circular) which intends to clarify as to how the new sub-rule shall be applied towards calculation of ITC eligible for availment.

Link is following for clarification
http://www.cbic.gov.in/resources/htdocs-cbec/gst/circular-cgst-123.pdf;jsessionid=4BBD657E18014B496C9EB3ABDB407F28

Author

CMA Md Rehan
ACMA, M. Com
(Practicing Cost Accountant)
Partner at CKC LLP