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As we know CBIC notifies Central Goods and Services Tax (Sixth Amendment) Rules, 2019 vide Circular No. 123/42/2019- GST dated 11th November 2019.

Impact of 20  ITC in books of accounts

Circular No. 123/42/2019 - Restriction in availment of input tax credit in terms of sub-rule (4) of rule 36 of CGST Rules, 2017.

Sub-rule (4) to rule 36 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) has been inserted vide notification No. 49/2019-Central Tax, dated 09.10.2019. The said sub-rule provides restriction in availment of input tax credit (ITC) in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act).

Notification No. 49/2019 - Central Tax dated 09-10-2019 and made some important changes.

1. Rule 36(4) inserted in the CGST Rules, 2017- 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 in their GSTR-1 under section 37(1), shall not exceed 20 % of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under section 37(1). Effectively ITC shall not exceed 20% of the eligible credit reflected in GSTR-2A.

2. Rule 61(5): Sub-rule 5 substituted in Rule 61 w.e.f 1st July, 2017

Where the time limit for furnishing of details in FORM GSTR-1 under section 37 or in FORM GSTR-2 under section 38 has been extended, the return specified in section 39(1) shall, in such manner and subject to such conditions as the Commissioner may, by notification, specify, be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:

Where a return in FORM GSTR-3B is required to be furnished by a person then such person shall not be required to furnish the return in FORM GSTR-3

The restriction imposed is not supplier wise. The credit available under sub-rule (4) of rule 36 is linked to total eligible credit from all suppliers against all supplies whose details have been uploaded by the suppliers. Further, the calculation would be based on only those invoices which are otherwise eligible for ITC. Accordingly, those invoices on which ITC is not available under any of the provision (say under sub-section (5) of section 17) would not be considered for calculating 20 % of the eligible credit available.

 

Let's discuss the practical process/journal entries of availing ITC restricted to 20% in our books of accounts.

 

Let's take an example to understand the impact in our books of accounts.

  

Particulars

Month Nov'19

Month Dec'19

Purchases Base Value

10000

20000

Total GST

1800

3600

GST Eligible

1200

3000

GST Ineligible

600

600

GST Payable

2500

5000

Entries in our Books -

  

Particulars

Month Nov'19

Month Dec'19

For Purchases

Purchase A/c ...........Dr 10000

GST Receivable A/c.........Dr 1200

Expenses A/c .........Dr 600

To Creditors A/c 11800

Purchase A/c ...........Dr 20000

GST Receivable A/c.........Dr 3000

Expenses A/c .........Dr 600

To Creditors A/c 23600

For Sales

Customer A/c.........Dr. 16388

To Sales A/c 13888

To GST Payable A/c 2500

Customer A/c.........Dr. 32777

To Sales A/c 27777

To GST Payable A/c 5000

Uploaded by Supplier as eligible ITC

900

2500

(Rs. 300 related to Nov'19)

Not-uploaded by Supplier in GST portal

GST Deferred Input A/c........Dr. 120

To GST Receivable A/c 120

(1200-(900+(900*20%))

GST Deferred Input A/c........Dr. 360

To GST Receivable A/c 360

(3000-(2200+(2200*20%))

GST Payable A/c........Dr 2500

To GST Receivable A/c 1080

To Bank A/c 1420

GST Payable A/c........Dr 5000

To GST Receivable A/c 2640

To GST Deferred Input A/c 120

To Bank A/c 2240

In this scenario, monthly reconciliation is required.


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Category GST, Other Articles by - CS kanak 



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