Since, most of us must have filed GSTR 3B for the month of October 2019 keeping in mind the new Rule 36(4), one thing we all have understood in GSTR-3B is that the record of calculations is now even more important. One of the biggest challenge now is that how to do the calculations for the month of November 2019 and for the subsequent months to come as we have already taken the provisional credit for the month of October 2019.

Many of the assesses  were taking credit based on the purchase invoices they had and by simply calculating the total output liability and reducing all the input tax credit on purchase invoices minus the ineligible credit, they were filing GSTR-3B. For the month of October 2019 we had a step further and now 2A is also part of this process.

Now, it is clear that we need to keep a track of lot of things while taking credit in GSTR 3B. CBIC has already clarified by its circular no. 123/42/2019– GST dated 11th November, 2019 that there is no check point on the common portal regarding this new rule and taxpayers need to take the credit on self-assessment basis only. So it’s the sole responsibility of the registered person to take care of the new rule 36(4) while taking credit.

MONTHLY RECONCILIATION OF 2A AND BOOKS

Earlier many of the taxpayers were getting notices as to why 3B of a particular month is not matching with the corresponding 2A statement but due to the dynamic credit mechanism it was quite difficult to match both the statements and department was not having any particular basis to challenge the taxpayers for the same. But now, with the introduction of rule 36(4), department may send us notices again if the GSTR 3B credit doesn’t match with 2A statement and it will be challenging for the taxpayers to match the statements if proper calculations are not done. 

HOW TO TAKE THE ITC FOR EVERY SINGLE MONTH

Let us understand this with an example.

Particulars	October 2019 (CASE-1)	October 2019 (CASE-2)
1. Total ITC as per Books	100000	100000
2. Total ineligible ITC as per Books	10000	10000
3. Total Eligible ITC as per Books(1-2)	90000	90000
4. Total ITC as per 2A	65000	90000
5. Total Ineligible ITC as per 2A	5000	5000
6. Total Eligible ITC as per 2A (4-5)	60000	85000
7. Maximum ITC that can be availed for October [(120% of (6)] or (3) whichever is lower)	=60000*120%= 72000 or 90000 whichever is lower Maximum ITC= 72000	=85000*120%=102000 or 90000 whichever is lower Maximum ITC= 90000
8. Eligible credit already showing in 2A (6)	60000	85000
9. Provisional Credit for October 2019 (7-8)	72000-60000= 12000	90000-85000= 5000
10. Balance ITC to be claimed in subsequent months (3-7)	18000	Nil/-

The above calculations seems not that difficult but when it comes to GSTR-3B of subsequent months, the correct calculations would play an important role. Let us go ahead for the month of November 2019

Particulars	Nov 2019
1. Total ITC as per Books	200000
2. Total ineligible ITC as per Books	20000
3. Total Eligible ITC as per books(1-2)	180000
4. Total ITC as per 2A	130000
5. Total Ineligible ITC as per 2A	10000
6. Total Eligible ITC as per 2A (4-5)	120000
7. Maximum ITC that can be availed for November [(120% of (6)] or (3) whichever is lower)	=120000*120%= 144000 or 180000 whichever is lower  Maximum ITC for Nov = 144000
8. Eligible credit already showing in 2A (6)	120000
9. Provisional Credit for November 2019 (7-8)	144000-120000= 24000
10. Balance ITC to be claimed in subsequent months (3-7)	36000

Now we need to recheck the 2A for the month of Oct 2019 while filing the GSTR 3B for the month of November 2019 

 

1. Eligible ITC (2A) as on 11.11.2019 (Ref Point No. 6 of case 1 for the month of Oct above) = 60000
2. Eligible ITC as per 2A of October as on the date of filing GSTR-3B for the month of Nov 2019 (e.g. 20/12/2019) =70000
3. Amount of invoices uploaded subsequently by suppliers for the month of October 2019 (B-A)= 10000

Additional ITC that can be taken related to Oct month= 10000*1.20= 12000

Minimum amount of invoices to be uploaded for claiming full input tax credit for the month of October 2019 (Total eligible ITC/ 1.2) = 90000/1.2= 75000

1. Invoices already uploaded by the suppliers upto 11.11.2019= 60000
2. Invoices uploaded by suppliers in subsequent month = 10000
3. Total ITC that can be claimed based on the invoices uploaded= (60000+10000)*120%= 84000
4. ITC already claimed for Oct 2019 month = 72000 (Point No. 7 Oct 2019 case 1 above)
5. ITC to be claimed while filing GSTR 3B of November (C-D)= 84000-72000= 12000 (related to October 2019)
6. ITC to be claimed while filing GSTR 3B of November (related to November 2019) =144000 (ref point no. 7 above)
7. Total Credit to be claimed while filing GSTR 3B of November (e+f)= 156000

Now we need to recheck again the 2A for the month of Oct 2019 while filing the GSTR 3B for the month of December 2019 

1. Eligible ITC (2A) as on 20.12.2019 (date of filing Nov return in our case) for the month of October 2019 = 70000
2. Eligible ITC as per 2A of October as on the date of filing GSTR-3B for the month of Dec 2019 (e.g. 20/01/2020) =80000
3. Amount of invoices uploaded subsequently by suppliers for the month of October 2019 (B-A)= 10000

Minimum amount of invoices to be uploaded for claiming full input tax credit for the month of October 2019 (Total eligible ITC/ 1.2) = 90000/1.2= 75000 as already mentioned above.

1. Invoices already uploaded by the suppliers upto 20.12.2019= 70000
2. Invoices uploaded by suppliers in subsequent month = 10000
3. Total ITC that can be claimed based on the invoices uploaded= (60000+10000+10000)*120%= 96000 or actual eligible ITC as per books i.e. 90000
4. ITC already claimed for Oct 2019 month = (72000+12000)=84000 (claimed in Oct month return for Oct 72000+ claimed in November month return for Oct 12000)
5. ITC to be claimed while filing GSTR 3B of December (C-D)= 90000-84000= 6000

The above calculations needs to be done for every single month till the time minimum amount of invoices are not uploaded by the suppliers on common portal for that particular month. 

WHEN 2A STATEMENT SHOULD BE DOWNLOADED

The circular has clarified that we need to check the 2A as on the due date of filing the return under section 37 (1) (GSTR-1) by the suppliers which is 11th of the succeeding month for monthly filers. Since, many taxpayers file their GSTR-1 on 11th only and 2A being a dynamic document keeps on changing, it is suggested that 2A should be downloaded on the night of 11th or early morning of 12th of the succeeding month. However, once the due date is crossed for a particular month and suppliers upload invoices on the common portal in subsequent months, then the 2A statement for that month should be downloaded again according to the date of filing of GSTR-3B of the taxpayer who is claiming the ITC.

ISSUES FOR QUARTERLY FILERS

Those suppliers who file their GSTR-1 quarterly, it is still a mystery to know how the credit of those invoices is to be taken for individual months. In this case taxpayers need to wait for their suppliers quarterly filing first and then only they can take the credit. This simply means blockage of working capital for a long period of three months.

EASY WAY OUT

So the next question that comes to our mind is that if there is any easy way out for this.

The answer to this question is that if we don’t have any issue with working capital requirements then only the 2A values can be taken for the purpose of taking the credit and 20% provisional credit should be avoided. This will make the ITC calculations a little easier but at the same time there will be blockage of working capital to the extent of 20% that could have been taken by the registered person.

It is understandable that the government has put these ITC conditions so as to keep a check on the frauds that are currently going on in availing fake input tax credits. But, this mechanism is quite harsh on taxpayers part and the govt. should come up with something which is practically feasible for the taxpayers.