ITC Effect of GSTR 1 Return Subject to 10% ITC for Purchase

As per the latest notification, dated 26th December, 2019, released by the Central Government, a few amendments in the Central Goods and Services Tax Rules, 2017, have been proposed. According to the new rule, “20 per cent” ITC for non-invoice returns is now replaced with “10 per cent” ITC, effective from the 1st January, 2020. It means, from 1st January 2020, only 10% ITC shall be available to those taxpayers who fail to upload related invoices on the portal. Earlier this amount was capped at 20%.

Under GST surveillance GSTR 3B is the monthly compliance form that needs to be furnished by the taxpayer mentioning the details of the outgo of his goods or services which were released during the whole month along with paying the relevant amount of tax applicable on those transactions. The form contains a separate section for mentioning the Input Tax Credit which a dealer (taxpayer) claims on his purchase of inputs for that particular month.

38th GST Council Meeting Update

Only 10% ITC available if invoice not uploaded by the taxpayer on the portal from the earlier 20% (Read Press Release)

GSTR 1 is yet another compliance form required to be filed by the regular taxpayer seeking the details of the invoices issued by him under the purchaser’s GSTN number, the taxable amount and total invoice value. Mentioning such information in B2B invoices is mandatory as this will be computed while determining the Input Tax Credit A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India.

Parallel to this is another mechanism in which all B2B invoices get recorded in the GSTN system and automatically appear on the GSTR 2A of the purchaser. GSTR 2A form allows entries of purchases done by the recipient.

To be Noted: As per current laws, the cap of 10% (i.e. Credit reflected in GSTR 2A plus 10% The CBIC has issued the notification on October 09, 2019 regarding Input tax credit limitation. Now, it is mandatory to upload complete invoices if taxpayers want full credit.) on input tax can be availed by the taxpayer on his purchases i.e. an additional benefit of 10% is extended to the taxpayer apart from the ITC shown on his GSTR 2A return.

There are certain instances as follows:

• Purchaser cum taxpayer is honest in his tax dealings but the seller fails to upload the invoice for a month and is planning to upload it in the next month.
• Purchaser cum taxpayer is honest in his tax dealings but the seller uploads the invoice mentioning the incorrect GSTN, as a result, an incorrect credit is reflected in GSTR 2A Find out the full procedure and functionalities of GSTR 2A form with the help of Gen GST software version 2.0. The process is showcased by a simple PDF format. of the purchaser.
• Purchaser cum taxpayer is honest in his tax dealings but the seller deliberately skips to upload any of his invoices in GSTR 1.
• There are disputes between the seller and purchaser related to the information entered in the forms by any of the two parties on which the purchaser can claim ITC. Invoice claimed to be uploaded in GSTR 1 of the seller and are not reflected in the GSTR 2A of the buyer causes the case of collusion and fraud.

By looking at the above examples it is clear that the recipient has paid the valid tax on the goods he has purchased from the supplier. In the majority cases, the people falling under the last category are fraudsters who want to make some quick money. The amendment made through Rule 36 (4) of the Central Goods and Service Tax Rules The CBIC has issued the notification on October 09, 2019 regarding Input tax credit limitation. Now, it is mandatory to upload complete invoices if taxpayers want full credit., 2017 is aimed at the fourth category only.

It is absolutely weird that according to a sub-rule (4) in Rule 36 which the legal administration penalises the genuine taxpayers who initiate to curb frauds committed by some fraudsters who against them. Now it is the duty of every taxpayer (Purchaser) to check on a frequent basis that his purchases are entered by his supplier correctly in the GSTR 1 form filed by him so that the same is visible in his GSTR 2A.

Moreover, the government is in action to bring in the limelight such fraudulent transactions on the basis of which some fraudsters claim the wrong availment of ITC.

Adding on to this government has made provisions to ensure that the honest purchasers get the right ITC which they deserve.

• A solid mechanism in GST forms Know the online procedure of filing GST returns in India. We provide each and every GST form details according to the taxpayers’ category. which where the purchaser can enter the details of invoices mentioning the GSTN of the supplier which can be matched back at the end of the GSTN system in the sales details entered by the supplier. Presently only the input tax credit figure which is being claimed by the taxpayer is required to be declared in the GSTR 3B form.
• If a mismatch in the details entered by the honest purchaser and the seller is spotted then the notice is sent to the seller demanding the payment of the correct amount and interest charges on the unpaid tax and sales undeclared.
• In the notice, the seller is either asked to pay the tax and interest charged or give his justification which will ultimately give a buzzer that whether the details by the purchaser are correct or the justification by the seller is genuine.
• Tax will be paid only after filing GSTR 1 and GSTR 3B with this one can make sure that the suppliers have uploaded correct invoices by the due date of the respective return so that GSTR 2A of the purchaser gets populated with the input tax credits at the earliest.

FAQs on Availment of Input Tax Credit by the Taxpayer