Rule 36 (4) - only 20% of eligible ITC reflected in the GSTR-2A is allowed

P K Gupta Nov 30, 2019 2938 0

Table of Content

New rule relating to provisional ITC of 20% in Form GSTR-3B
Impact of this new rule 36(4) on the working capital of Assessee
Procedure to claim the balance ITC
This 20% calculation is supplier wise or in totality?

Calculation of 20% Provisional ITC as per the New CGST Rule 36(4)

(Impotant Note: please note that rate of 20% has been reduced to 10% in 38th GST Council Meeting held on 18th December, 2019. So do calculate all the figures with 10%)

On 9 October 2019 CBIC released a notification, inserting a new sub-rule (4) under rule 36 of the CGST Rules, 2017, stating that provisional credit can be hereafter claimed in the GSTR-3B only to the extent of 20% of eligible ITC reflected in the GSTR-2A of that period.

On 11 November 2019, a circular clarifying the issues relating to the implementation of this new rule was released.

1. New rule relating to provisional ITC of 20% in Form GSTR-3B:

As per the new rule 36(4) of the CGST Rules, 2017, Input in GSTR-3B can be claimed provisionally only to the extent of 20% of the eligible credit available in GSTR -2A, in respect of invoices or debit notes, which have been uploaded by the suppliers.

We can understand this with an example:

Suppose on assessee is filing the return (GSTR 3B) of December 19, we will check the both situations i.e. before this rule and after this rule:

Particular	Situation before this rule	Situation after this rule
Eligible ITC as per Assessee Books (X)	2,50,000	2,50,000
Eligible ITC as per GSTR-2A (Y)	1,50,000	1,50,000
Provision claimable ITC (Z)	1,00,000	30,000
Total ITC that can be claimed in GSTR-3B (P) = Y+Z	2,50,000	1,80,000
ITC not allowed in Dec. 19 GSTR-3B	NIL	70,000

Also note the eligible word in above example, So ITC which is ineligible will not be considered while calculating the above 20% value. Which can be understood by taking above example with slight changes:

Particular	Amount in Rs.
Eligible ITC as per Assessee Books (X)	2,50,000
Ineligible ITC as per Assessee Books (Y)	50,000
Total ITC as per Assessee Books (Z)	3,00,000
Eligible ITC as per GSTR-2A (A)	1,50,000
Ineligible ITC as per GSTR-2A (B)	20,000
Total ITC as per GSTR-2A (C)	1,70,000
Total ITC difference = Z – C (3,00,000 – 1,70,000)	1,30,000
Eligible ITC difference = X – A (2,50,000 – 1,50,000)	1,00,000

So, before implementation of Rule 36(4) the entire amount of Rs. 1,00,000/- (difference of elegible ITC in Books and 2A) could have been claimed by assessee but now after implementation of Rule 36(4) only Rs. 30,000/- can be claimed and balance Rs. 70,000/- needs to be paid while filing Dec. 19 GSTR – 3B.

2. Impact of this new rule 36(4) on the working capital of Assessee:

This new rule will impact the working capital of an assessee to a great extent, which can be explained based on above example:

We can see from above example that Rs. 70,000/- will be required to be paid while filing the GSTR – 3B of December -19 otherwise as per previous situation (before this Rule 36(4)) the same was not required to be paid. And point of concern is that the assessee has already paid this amount of Rs. 70,000/- to the supplier.

And in some case where turnover is huge, this amount of Rs. 70,000/- may touch the figure in crores.

3. Procedure to claim the balance ITC (Rs. 70,000 in above case)?

ITC which was not claimed in previous month due to this 20% rule, can be claimed in succeeding month (January 2020, month) in which supplier uploaded the invoices and these invoices properly reflected in the GSTR-2A. and if in this succeeding month also the supplier has uploaded only part of the pending invoices than again the calculation will done as per 20% rule for those invoices, which we can understand by following example:

Amount in Rs.

Particulars	Situation 1	Situation 2	Situation 3
Provisional ITC Claimed in above example (A)	30,000	30,000	30,000
ITC pending to be claimed (B)	70,000	70,000	70,000
Eligible ITC on further invoices uploaded (C)	35,000	60,000	70,000
Provision ITC that can be claimed in January 2020 3B (out of balance for December 19) (D)= (20% of C)	7,000	12,000	70,000
Total ITC that can be claimed in Jan. 20, 3B, E = (C+D)	42,000	70,000*	70,000
Balance ITC that cannot be claimed in Jan 20	28,000	NIL	NIL