Important Update to GSTR-3B Filers; Provisional ITC Now Limited to 20%

A significant CBIC announcement was made on 9 October 2019. The notification no. 49/2019- Central Tax has amended the rule 36 of CGST Rules. Now, a taxpayer, filing GSTR-3B, can claim provisional input tax credit only to the extent of 20% of the figure appearing in GSTR-2A. The date of implementation will be announced in the official gazette soon. 

Earlier, the 37th GST Council meeting held on 20 September 2019 announced that the provisional input tax credit (ITC) claims will be restricted under the present GST return filing system of GSTR-1 and GSTR-3B. ITC claim will not be allowed in full for any recipient if their suppliers have not furnished the details of outward supplies.

In other words, a recipient can declare an ITC amount in GSTR-3B for transaction invoices that are not uploaded by the suppliers as per GSTR-2A. But this amount will be restricted only to the extent of 20% of the eligible ITC value already reported in GSTR-2A for that period. 

Let’s decode the rule with an example. Suppose a taxpayer is filing GSTR-3B for November 2019 in December 2019. Before he declares the ITC figure in GSTR-3B, he should reconcile the purchase register and expense ledger for that period with GSTR-2A of the same period, preferably by 20 December 2019. Assume that the ITC appearing in GSTR-2A is Rs 20,000 and the same accounts to Rs 30,000 as per his records.

Also Read: Enterprises May Need to Revamp ERP Systems to Prepare for New GSTR

As per the previous regulations, he could have claimed the entire Rs 30,000. In the subsequent month, he could have adjusted this provisional claim against GSTR-2A of future months for those invoices. It required a year-to-date reconciliation and tracking of invoices later on.

Upon the enforcement of the latest regulations, he will be able to claim only Rs 24,000 in GSTR-3B of November 2019:

    • Rs 20,000: Actual ITC based on information available in GSTR-2A
    • Rs 4,000: Provisional ITC based on the calculation, i.e. 20% of ITC mentioned in GSTR-2A

The taxpayer is required to permanently set up a system of invoice tracking and a continuous communication link with every vendor/supplier. Even before the filing of GSTR-3B, reconciliation becomes mandatory. There is no clarity on when the new validations in GSTR-3B will be live on the GST portal. 

It is important to take note of a provision that was added to the CGST Act in February 2019, Section 43A. The section specified the same condition but would become applicable only when the rules were notified. This provision would hold relevance once the new GST return system with ANX-2 and RET-1/2/3 come into effect. 

But the rules are notified sooner than expected; the new GST return system will be implemented in April 2020. Hence, all the regular taxpayers must follow this rule for present GST returns filed in GSTR-3B.

However, it looks evident that the onus of declaring genuine ITC values in GSTR-3B is that of recipient himself, similar to the new GST return system. The limitation will also help curb the menace of tax evasion using fake invoices.

For any clarifications/feedback on the topic, please contact the writer at

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