The CBIC vide Circular No. 142/12/2020 dated 09/10/2020 has issued Clarification relating to application of sub-rule (4) of rule 36 of the CGST Rules, 2017 for the months of February, 2020 to August, 2020.
The CBIC has advised to all taxpayers that they should reconcile the ITC availed in their FORM GSTR-3Bs for the period February, 2020 to August, 2020 with the details of invoices uploaded by their suppliers of the said months, till the due date of furnishing FORM GSTR-1 for the month of September, 2020.
The cumulative amount of ITC availed for the said months in FORM GSTR-3B should not exceed 110% of the cumulative value 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 of the CGST Act, till the due date of furnishing of the statements in FORM GSTR-1 for the month of September, 2020.
The CBIC also said that "The excess ITC availed arising out of reconciliation during this period, if any, shall be required to be reversed in Table 4(B)(2) of FORM GSTR-3B, for the month of September, 2020. Failure to reverse such excess availed ITC on account of cumulative application of sub-rule (4) of rule 36 of the CGST Rules would be treated as availment of ineligible ITC during the month of September, 2020."
The Circular was issued by the apex body after the notification No. 30/2020-CT, dated 03.04.2020, wherein CBIC had prescribed that the condition made under sub-rule (4) of rule 36 of the CGST Rules shall apply cumulatively for the tax period February, March, April, May, June, July and August, 2020 and that 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.
Illustration explaining the above provision :
| Tax Period |
Eligible ITC as per CGST Act and the rules made thereunder, except rule 36(4) |
ITC availed by the taxpayer in GSTR3B |
ITC as per GSTR2A till due date of FORM GSTR-1 for the tax period of September,2020 |
| Feb-20 | 400.00 | 400.00 | 360.00 |
| Mar-20 | 100.00 | 100.00 | 90.00 |
| Apr-20 | 150.00 | 150.00 | 135.00 |
| May-20 | 200.00 | 200.00 | 140.00 |
| Jun-20 | 150.00 | 150.00 | 135.00 |
| Jul-20 | 200.00 | 200.00 | 180.00 |
| Aug-20 | 250.00 | 250.00 | 200.00 |
| Total | 1,450.00 | 1,450.00 | 1,240.00 |
Effect of cumulative application of rule 36(4) on availability of ITC on above Illustration : Maximum eligible ITC in terms of rule 36 (4) is 1240 + [10% of 1240] = 1364. Taxpayer had availed ITC of 1450. Therefore, ITC of 86 [1450-1364] would be required to be reversed as mentioned above under Table 4(B)(2).
Note : 10% Rule shall apply independently for September, 2020
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