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Methodology for computing provisional GST credit as per 11th Nov circular

Jatin 
on 13 November 2019


Methodology for computation of provisional credit under rule 36 (4)

 

(Circular no. 123/42/2019-GST dated November 11, 2019)

The Government has recently introduced an amendment in the GST law in relation to availment of provisional Input Tax Credit ("ITC"), notified vide Notification No. 49/2019-CT dated October 9, 2019. The relevant extract of amendment under rule 36 of Central Goods and Services Tax Rules, 2017 is produced as below:

"4) 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 per cent. 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.".

 

To ensure uniformity in implementation of the above mentioned provision, the CBIC has issued a circular (Circular no. 123/42/2019-GST) dated November 11,2019.

Key points for consideration

Below are the key points for consideration from the circular issued:

  • The restriction under rule 36 (4) is not imposed through the common portal rather it shall be done on self-assessment basis by the taxpayers;
  • For the purpose of calculating the 20% limit, credits pertaining to the following transactions shall be excluded since the same are outside the ambit of 37(1):
    • IGST paid on import
    • Credit in relation to transactions on which RCM is applicable
    • Credit received from ISD
  • The restriction imposed under rule 36(4) is not qua a supplier rather it is linked to aggregate eligible credit uploaded by all the suppliers;
  • The limit of 20% shall be separately calculated for each tax head i.e. IGST and CGST & SGST;
  • The invoices or debit notes uploaded by the supplier under section 37(1) as on the due date of filing return in FORM GSTR-1 of the supplier of the said tax period has to be considered for calculation of limit and reconciliation activity;
  • Taxpayer may avail full ITC in respect of tax period, as and when invoices are uploaded by suppliers to the extent "Eligible ITC/1.2"

Methodology for computation of provisional credit under rule 36(4)

Calculation of ITC available for availment for the month of October 2019

Step 1: Identification of opening transactions as on October 1, 2019

Perform a reconciliation between the data as per GSTR 2A vis-à-vis purchase register (tagging relevant month on the data) considering the data from April to September 2019 and identify the below:

  1. Missing in client data (transactions which are not reflecting in purchase register)
  2. Missing in GSTR 2A (transactions which has not been uploaded by the vendor)

Step 2: Calculation of actual provisional credit for the month of October 2019

A. Perform a reconciliation between the data as per purchase register vis-à-vis data uploaded by the vendor:

  

Data as per purchase register comprising of the following

Data uploaded by the vendor (GSTR 2A) as on 12th of subsequent month comprising of the following

Purchase register for the month of October 2019

GSTR 2A for the month of October 2019

 

Missing in client data (as per 'point A of step 1')

B. Output/ status of above reconciliation would be:

  1. Matched transaction- Transactions matched in above reconciliation
  2. Missing in GSTR 2A- Transactions not uploaded by the vendor
  3. Missing in client data- Transactions not available in above purchase register

C. Actual provisional credit for the month of October 2019 would be missing in GSTR 2A as per 'B (II) of step 2'

Step 3: Calculation of limit of provisional credit for the month of October 2019

Limit of provisional credit for the month of October 2019 would be 20% of matched transaction as per 'B (I) of step 2'

Step 4: Calculation of total ITC available for availment in the month of October 2019 (GSTR 3B)

Total credit available for availment in the month of October 2019 would be:

  1. Matched transaction as per 'B (I) of step 2'; and
  2. Lower of actual provisional credit as per 'C of step 2' or provisional credit as per 'step 3'

Calculation of ITC available for availment for the month of November 2019

Step 1: Calculation of Actual provisional credit for the month of November

A. Perform a reconciliation between the data as per purchase register (tagging relevant month on the data) vis-à-vis data uploaded by the vendor (GSTR 2A) comprising of the following:

  

Data as per purchase register comprising of the following

Data uploaded by the vendor (GSTR 2A) comprising of the following

Purchase register for the month of November 2019

GSTR 2A for the month of November 2019

Missing in GSTR 2A (as per point 'B (II) of Step 2' from the October 2019 month calculation)

Purpose: The same would be required for checking the eligibility of full ITC pertaining to the previous month. Whenever cumulatively more than 83% of total ITC matched, the Company can avail full actual ITC for that month.

Missing in client data (as per point 'B (III) of Step 2' from the October 2019 month calculation)

B. Output/ status of above reconciliation should have the tagging of relevant months and would be bifurcated as below:

1. Matched transaction out of purchase register for the month of November 2019 -

Transactions which have been matched out of purchase register for the month of November 2019

2. Missing in GSTR 2A out of the purchase register for the month November 2019 -

Transactions which have not been uploaded by the vendor out of purchase register for the month of November 2019

3. Matched transactions out of purchase register for the month of October 2019 -

Transactions which have been matched out of the purchase register for the month of October 2019

4. Missing in GSTR 2A out of purchase register for the month of October 2019 -

Transactions which have not been uploaded by the vendor out of purchase register for the month of October 2019

5. Missing in client data as on date -

Data which is not available in above purchase register as on date

C. Actual provisional credit for the month of November 2019 would be missing in GSTR 2A out of purchase register for the month of November 2019 as per point 'B (II) of step 1'.

Step 2: Calculation of Limit of provisional credit for the month of November 2019

Limit of provisional credit for the month of November 2019 would be 20% of matched transaction as per point 'B (I) of step 1'.

Step 3: Calculation of total ITC available for availment in the month of November 2019 (in GSTR 3B)

Total credit available for availment in the month of November 2019 would be:

  1. Matched transactions for the month of November 2019 as per 'B (I) of step 2'; and,
  2. Lower of actual provisional credit as per 'C of step 1' or provisional credit as per 'step 2'

Step 4: Procedure for claiming the balance ITC of the month of October 2019 (in the month of November 2019)

  • The Company can claim the input tax credit lower of below:
    • 120% of additional matched credit (as per point 'B (III) of Step 1') or
    • Unavailed credit of the month of October 2019;
  • The Company would be required to maintain a separate reconciliation for each month till the entire credit for that month is availed
  • The Company can avail the full credit as when cumulatively more than 83% of transaction has been matched for the month of October 2019
 

For subsequent months the steps for November 2019 would be repeated.

Ambiguity:

Whether the details uploaded by supplier post 11th of the subsequent can be considered for the purpose of computation of limit and availment of matched credit. In our view the same may be considered, however we request you to provide your valuable inputs with respect to same.

  

Tracker for provisional credit under rule 36:

         
As per circular 123/42/2019- GST dated 11 Nov 2019          
               
Month of compliance Steps Particulars Data for the month October   Steps Particulars Data for the month November
October   Data as per purchase register of the month 100        
Point B (I) of Step 2 Matched transactions for the month of October 19 70        
Point B (II) of Step 2 Missing in GSTR 2A for the month of October 19 30        
Point C of Step 2 Actual provisional credit for the month of October 19 30        
Step 3 Limit of provisional credit for the month of October 19 14        
Point I of Step 4 Matched transactions for the month of October 19 70        
Point II of Step 4 Maximum provisional credit to be availed 14        
  Total ITC to be availed in the month of Oct 19 (for the month of Oct 19) 84        
               
November   Matched transactions as on previous month 70     Data as per purchase register of the month 100
Point B (III) of Step 1 Additional transaction matched during the month 14   Point B (I) of Step 1 Matched transactions for the month November 19 60
Point B (IV) of Step 1 Missing in GSTR 2A as on current month 16   Point B (II) of Step 1 Missing in GSTR 2A for the month of November 19 40
Step 4 Actual provisional credit 16   Point C of Step 1 Actual provisional credit for the month of November 19 40
Limit of provisional credit as on month 16.8   Step 2 Limit of provisional credit for the month of November 19 12
Provisional credit already availed 14   Point I of Step 3 Matched transactions for the month November 19 60
Limit for the month 2.8   Point II of Step 3 Maximum provisional credit to be availed 12
Maximum ITC that can be availed 2     Total ITC to be availed in the month of Nov 19 (for the month of Nov 19) 72
Maximum provisional credit to be availed 2        
Total ITC to be availed in the month of Nov 19 (for the month of Oct 19) 16        
               
December   Matched transactions as on previous month 84     Matched transactions as on previous month 60
Point B (III) of Step 1 Additional transaction matched during the month 14   Point B (III) of Step 1 Additional transaction matched during the month 15
Point B (IV) of Step 1 Missing in GSTR 2A as on current month 2   Point B (IV) of Step 1 Missing in GSTR 2A as on current month 25
Step 4 Actual provisional credit 2   Step 4 Actual provisional credit 25
Limit of provisional credit as on month 19.6   Limit of provisional credit as on month 15
Provisional credit already availed 16   Provisional credit already availed 12
Limit for the month 3.6   Limit for the month 3
Maximum ITC that can be availed 0   Maximum ITC that can be availed 13
Maximum provisional credit to be availed 0   Maximum provisional credit to be availed 3
Total ITC to be availed in the month of Dec 19 (for the month of Oct 19) 0   Total ITC to be availed in the month of Dec 19 (for the month of Nov 19) 18

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