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Relaxation on Input Tax Credit Limit from February 2020 to August 2020

CA Adityavikram Banka

The Government has issued several notifications in order to implement the compliance relaxation announced by Hon’ble Finance Minister amid Pandemic COVID 19. We have compiled various Clarification on Relaxation on Input Tax Credit Limit from February 2020 to August 2020.

Rule 36(4) of the CGST Rules, 2017 provides that the Input Tax Credit on the basis of such invoices or debit notes which are not reflected in GSTR-2A of the taxpayer shall not exceed 10% of the eligible Input Tax Credit available in respect of invoices or debit notes the details of which have been reflected in GSTR-2A. The said restriction is applicable for each tax period/ month.

The CBIC, vide Notification No. 30/2020-CT dated 03.04.2020, has inserted a proviso to Rule 36(4) of the CGST Rules, 2017 to provide that the above condition shall apply cumulatively for the period February 2020 to August 2020 and the return in Form GSTR-3B for the tax period September 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months.

Thus, the taxpayer can avail Input Tax Credit on the basis of such invoices or debit notes which are not reflected in GSTR-2A of the taxpayer for the period February 2020 to August 2020.

However, at the time of filing of return in GSTR-3B for the month of September 2020 the taxpayer has to apply the restriction of 10% cumulatively for the period February 2020 to August 2020 and make adjustment in its electronic credit ledger.

For example:

The total Input Tax Credit availed by the taxpayer for the period February 2020 to August 2020 is INR 3,00,000/-. The Input Tax Credit, on the basis of invoices or debit notes which are reflected in GSTR-2A for the period February 2020 to August 2020, is INR 2,00,000/-.

Thus, the registered person in GSTR-3B for the month of September 2020 shall be liable to reverse the Input Tax Credit which is in excess of the 10% of the eligible Input Tax Credit available in respect of invoices or debit notes the details of which have been reflected in GSTR-2A. Hence, the registered person shall be liable to reverse Input Tax Credit of INR 90,000/- (i.e. 10% of INR 1,00,000/-) in GSTR-3B for the month of September 2020.

CA Adityavikram Banka
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