Weekly Updates [03 – 09 October, 2020 – 171st Week of GST]

Circular No. 142/12/2020-GST was issued this week in order to clarify the cumulative applicability of Rule 36(4) of the CGSTR, 2017 for the months of February, 2020 to August, 2020.

We know that Rule 36(4) was inserted in CGSTR, 2017 vide Notfn. No. 49/2019 – CT dated 09 October, 2019. However, considering the nation-wide lockdown implemented to contain the spread of COVID-19 pandemic, a proviso was inserted to this sub-rule vide Notfn. No. 30/2020 – CT, issued on 03 April, 2020, to provide that the aforesaid sub-rule shall apply cumulatively for the period Feb – Aug, 2020 and FORM GSTR – 3B for Sep,’20 shall be furnished with the cumulative adjustment of ITC for the said months.

Through this Circular, the CG has reiterated that the clarifications issued in this regard vide the erstwhile issued Circular No. 123/42/2019-GST shall still remain applicable, except for the cumulative application part. Hence, the taxpayers have been advised to ascertain the details of invoices uploaded by the respective suppliers in their FORM GSTR – 1 for the aforementioned relevant months, till the due date of furnishing FORM GSTR – 1 for the months of September 2020, as appearing in their FORM GSTR – 2A.

Taxpayers have been asked to reconcile the ITC availed in their FORM GSTR – 3Bs for the aforesaid period with the details of the invoices appearing in their FORM GSTR – 2A till the due date of furnishing FORM GSTR – 1 for Sep,’20, and ensure that the cumulative amount of ITC availed for the said months does not exceed 110% of the cumulative value of the eligible credit available in respect of invoices/ dr. notes reflecting in FORM GSTR – 2A till the said date.

However, please note that availability of 110% of the cumulative value of eligible credit available in respect of invoices/ dr. notes reflecting in FORM GSTR – 2A does not mean that the total ITC can exceed the tax amount reflected in total invoices for the supplies received by the taxpayer, which would be the maximum ITC available as per Section 16 of the CGSTA, 2017.

Any excess ITC availed arising out of the aforementioned reconciliation during this period, shall be required to be reversed in Table No. 4(B)(2) of FORM GSTR – 3B for the month of Sep,’20, failing which, the said excess shall be treated as availment of ineligible ITC during the month of Sep,’20.

For example, let us say a taxpayer has availed a total amount of ₹ 27.50 lakhs during the period February, 2020 to August, 2020 on the basis of the invoices received during the said period. However, the invoices on which ITC is eligible and uploaded by the suppliers till the due date of furnishing FORM GSTR – 1 for September, 2020 amounted to only ₹ 24.50 lakhs. As a result, the maximum eligible ITC in terms of Rule 36(4) is only ₹ 26.95 lakhs [₹ 24.50 + 10% of ₹ 24.50]. The said taxpayer is required to reverse the excess ITC of ₹ 0.55 lakhs [₹ 27.50 lakhs – ₹ 26.95 lakhs] under Table 4(B)(2) of FORM GSTR – 3B for September, 2020.

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