The CBIC released a notification on the 9th of October, 2019 stating that provisional Input Tax Credit (ITC) under GST will be hereafter restricted to 20% of the eligible ITC as per details uploaded by the suppliers.
There has been much speculation amongst taxpayers since then as to how exactly this rule would work. As per a circular released today, the CBIC has clarified the conditions for availing ITC under this rule, as well as certain scenarios for claiming ITC that may arise due to the implementation of this rule.
Taxpayers were uncertain until now about whether ITC could be claimed at 20% of the eligible ITC reported by individual suppliers reflecting in the GSTR-2A or the total eligible ITC based on details uploaded by all suppliers.
The circular clarifies that the restriction will not be supplier-wise. It will be linked to the total eligible ITC from all suppliers based on details uploaded on the GST portal.
The circular also clarifies that the restriction will only apply to those invoices/debit notes which were supposed to be uploaded by the suppliers and have not been uploaded. This means that taxpayers can avail full ITC in terms of IGST paid on imports, credit that has been received from an Input Service Distributor (ISD), credit from documents received under the reverse-charge mechanism and any other such credit.
Since form GSTR-2A is a dynamic form which reflects credit based on when a supplier uploads his invoices, a taxpayer will be able to claim provisional credit based on the documents which have been uploaded until the due date of filing returns only. Hence, a taxpayer may claim up to 20% of ITC based on invoices uploaded by his suppliers as on the date of filing his GSTR-1.
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 the suppliers have partly uploaded the pending invoices in a later period, the taxpayer will be able to claim ITC on these invoices plus provisional ITC proportional up to 20% of pending invoices uploaded.
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Athena is a globe-trotter whose aim is to see 30 countries before she’s 30. When she’s not travelling, she’s busy planning her next trip. She’s a Chartered Accountant by profession with a keen focus on GST. She writes by day and reads by night.