10% GST ITC Calculation : New GST Rule of Input Tax Credit

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GST is not easy. Since the implementation of GST, CBIC has made many amendments. It even gave a lot of clarifications to simplify the GST process. Also, it took steps for easy understanding or to make it better for overcoming the faced problems and difficulties. Through these steps the GST became Good and simple Tax for Government while on the other hand Gabbar Singh Tax for the taxpayers. This article deals with the New GST rule of 10% Input Tax Credit (ITC) in GST which has became a major problem in businesses now a days.

CBIC inserted a sub-rule (4) in rule 36 of Central Goods and Services Tax Rules, 2017 ("CGST Rules") by way of Notification No. 49/2019-Central Tax which restricts Input Tax Credit by a certain percentage in case of invoices not found in GSTR 2A.

The said notification was issued earlier which says that "Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 percent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37."

CGST RULE 36(4): Rule 36 (4) states the limit of availment of ITC by the taxman in respect of invoices, debit notes which are not uploaded by their supplier in GSTR 1. In other words, it tells us how much percentage (%) of missing ITC of the invoices you can take which are not reflected in GSTR 2A

Eligible Input tax credit (ITC) means Tax paid at the time of purchase to supplier which is available as ITC.

Let understand the concept with an example:

ParticularsBefore any ITC ruleAfter 10% ITC RuleEligible ITC in purchase book (a)10001000Eligible ITC in GSTR 2A (b)600 600ITC that can be claimed provisionally (c)400 60 (600*10%)Total ITC can be claimed in GSTR-3B (d)= (b)+(c)1000 660ITC not allowed at present (e)= (a)-(d)NIL 340

After seeing the example above one will have a doubt that when we can get credit of remaining ITC or Rs.340, in this case? Like this there are many questions and doubts which arise from this notification. But before this let discuss about this new 10% GST ITC rule.

Why 10 % GST ITC rule is inserted?

Before this rule, a taxpayer can claim ITC without matching the GSTR-2A or even if the credit is not shown in GSTR-2A or uploaded by the supplier. Earlier, a taxpayer could claim credit on his/her self-declaration basis.

What a businessman should do?Challenges or Problems in 10% GST ITC rule General questions or doubts:

QUESTION – What happens in case of claiming more than 110% of reflected ITC?

QUESTION – When we get credit of remaining ITC?

QUESTION – What if the supplier is filling return quarterly?

QUESTION – Supplier file late return and can I claim ITC 110%?

For any questions, you may reach us at Discussion Forum