Blog on Circular No. 142/12/2020-GST: Clarification on Rule 36(4) for ITC Availment (Feb 2020

2025-03-03 09:31:10 02March

02March

Blog on Circular No. 142/12/2020-GST: Clarification on Rule 36(4) for ITC Availment (Feb 2020 - Aug 2020)

<a href="https://cms.plasament.com/storage/nisha/circular-142-gst-cumulative.pdf">Circular-142-GST-Cumulative</a> IntroductionThe Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 142/12/2020-GST on October 9, 2020, to clarify the cumulative application of Rule 36(4) of the CGST Rules for the months of February 2020 to August 2020. The circular was issued in response to ITC (Input Tax Credit) restrictions on invoices not uploaded by suppliers, considering the impact of COVID-19 lockdowns on tax compliance.<hr><h3>Key Highlights of the Circular</h3><h4>1. Background of Rule 36(4)</h4><ul><li>Rule 36(4) of the CGST Rules restricts the availment of ITC on invoices not uploaded by suppliers in GSTR-1.</li><li>Initially, taxpayers could avail ITC only up to 10% more than what was reflected in GSTR-2A.</li><li>Due to COVID-19 disruptions, the government relaxed compliance requirements and allowed cumulative ITC adjustments in September 2020's GSTR-3B.</li></ul><h4>2. Cumulative ITC Adjustment for Feb-Aug 2020</h4><ul><li>Notification No. 30/2020-CT (April 3, 2020) allowed cumulative ITC reconciliation in September 2020 instead of restricting it month-wise.</li><li>Taxpayers had to reconcile their ITC from Feb-Aug 2020 with invoices uploaded in GSTR-1 of September 2020.</li><li>ITC could not exceed 110% of the eligible credit available from suppliers' uploaded invoices.</li></ul><h4>3. ITC Reconciliation & Reversal Process</h4><ul><li>Step 1: Compare ITC availed from Feb-Aug 2020 with ITC available from GSTR-2A (suppliers’ uploaded invoices) till the due date of GSTR-1 for September 2020.</li><li>Step 2: If ITC availed exceeds the 110% limit, the excess must be reversed in Table 4(B)(2) of GSTR-3B for September 2020.</li></ul><h4>4. Example Illustration for ITC Computation</h4><figure class="table"><table><thead><tr><th>Month</th><th>ITC Availed (GSTR-3B)</th><th>ITC from Suppliers (GSTR-1)</th><th>Allowed ITC (110%)</th><th>Reversal Required</th></tr></thead><tbody><tr><td>Feb 2020</td><td>300</td><td>270</td><td>297</td><td>3</td></tr><tr><td>March 2020</td><td>400</td><td>380</td><td>418</td><td>0</td></tr><tr><td>April 2020</td><td>500</td><td>450</td><td>495</td><td>0</td></tr><tr><td>May 2020</td><td>350</td><td>320</td><td>352</td><td>0</td></tr><tr><td>June 2020</td><td>450</td><td>400</td><td>440</td><td>0</td></tr><tr><td>July 2020</td><td>550</td><td>480</td><td>528</td><td>22</td></tr><tr><td>Aug 2020</td><td>200</td><td>150</td><td>165</td><td>35</td></tr><tr><td>Total</td><td>2750</td><td>2450</td><td>2695</td><td>55</td></tr></tbody></table></figure><ul><li>Total ITC availed = ₹2750</li><li>Total ITC eligible as per 110% rule = ₹2695</li><li>Excess ITC to be reversed = ₹55 (To be shown in Table 4(B)(2) of Sept 2020 GSTR-3B)</li></ul><h4>5. ITC Restrictions for September 2020 Onwards</h4><ul><li>From September 2020, the 10% ITC rule applies independently.</li><li>Taxpayers must strictly adhere to ITC limits based on uploaded invoices.</li></ul>