Clarifications Regarding Availment of ITC for the Period February 2020 - August 2020

Circular No. 142/12/2020 - GST dated October 9, 2020

Rule 36(4) of CGST Rules, 2017 states that Input Tax Credit (ITC) availed by a registered person while furnishing GSTR-3B shall not exceed 110% of ITC furnished by his suppliers in GSTR-2A.

To ease the compliance burden on the taxpayers for the lockdown period, Notification No. 30/2020-Central Tax dated April 3, 2020, was issued stating that for the monthly return GSTR-3B of September 2020 shall include the cumulative ITC for the period from February to August 2020. It pertains to mention that here “Cumulative ITC” is an extra 10% ITC over the information furnished by the supplier in GSTR-2A. It connotes that for the period from February to August 2020 returns, the taxpayers can avail only that ITC which is supplied by the supplier in GSTR-2A but in return for September 2020, he may avail the ITC for September period and also concerning the said period. Availment of 110% of cumulative ITC over the information supplied by the supplier doesn’t mean total credit exceeds tax amount as reflected in total invoices for supply received by the taxpayer. To avail such ITC, taxpayers shall be required to eligible for ITC under Section 16 of CGST Act, 2017.

Circular No. 142/12/2020-GST clarifies that -

All the taxpayers shall reconcile the ITC furnished by suppliers for the period of February – August 2020 in GSTR-2A with that of return GSTR-3B of same months till October 11, 2020. The cumulative amount of ITC in GSTR-3B for same months shall not exceed 110% of the cumulative value of eligible ITC furnished by suppliers in GSTR-2A till October 11, 2020. If it does, then it shall be reversed by furnishing it the same in Table 4(B)(2) of GSTR-3B. Failure of reversal shall be considered to availment of ineligible ITC and taxpayers shall be penalized with Section 50 & Section 73 of CGST Act, 2017.

To comply with Rule 36(4) of the CGST Rules, 2017 and ease compliance during the lockdown period, Circular No. 142/12/2020-GST clarifies that taxpayers must reconcile ITC in GSTR-2A with GSTR-3B and ensure that cumulative ITC does not exceed 110%. Failure to comply may result in penalties under the CGST Act, 2017.

Ensure compliance with Circular No. 142/12/2020-GST by reconciling ITC with GSTR-2A and GSTR-3B till October 11, 2020. Reverse any excess ITC availed and avoid penalties under Section 50 & Section 73 of CGST Act, 2017. Seek professional assistance for proper implementation then, feel free to mail us at info@manishanilgupta.com

Disclaimer:The information given above is to provide general guidance to the readers. This information should not be sought as a substitute for legal opinion