The total ITC claimed should not be more than 120%

The total ITC claimed should not be more than 120% of the credit available as per Invoices / Debit notes appearing in GSTR-2A – Rule 36(4)

  • New sub-rule 36(4) has been inserted to specify that the total credit availed on invoices & Debit notes not appearing in GSTR-2A should not exceed 20% of the matched and eligible credit.
  • The effective date for the same hasn’t been notified. Hence, the same shall be effective from the date of notification, i.e. 09-Oct-2019
    Example:
  • The concept of 20% additional credit has been widely misunderstood by the trade and professionals. To clarify, the same has been explained with an illustration below:
    Assume The Following:

    1. The total credit as per the Books of accounts is A = Rs. 500/-
    2. The full eligible credit of invoices in GSTR-2A matching with invoices in books of accounts is B = Rs. 200/-
    3. The total credit if invoices only in GSTR-2A is C = Rs. 100/-
  • Further, the period for which the above rule should be applied and the frequency of the same has not been specified.
  • To date, though the department has issued many notices related to the differences between the credit as per GSTR-2A & 3B, there was no final provision to deny the credit on that basis.
  • Hence, to get a legal backup and to emphasise credit based on GSTR-2A, a new sub-rule has been inserted to specify that the credit availed by the supplier should be supported by the entries in GSTR-2A. However, relaxation has been provided to the extent of 20% of the matched credit.
  • Although there are multiple arguments on the legal ramification of the amendment, the compliance of the same would lay a good path for compliance with Annexe-2 of new return formats.

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