| Only 10% provisional credit allowed instead of 20% In the recent GST Council meet, provisional credit limit has been reduced from 20% to 10%. This provisional credit rule says that ITC cannot be claimed as per your own records. Businesses need to make sure that their suppliers have uploaded invoices and these are reflecting in GSTR-2A. If the supplier has not uploaded an invoice, it won’t appear in GSTR-2A. But a buyer may have still paid for it and done what was required to claim ITC. The maximum amount of credit that will be allowed towards such invoices (which are not uploaded) will be capped at 10% of total eligible credit appearing in GSTR-2A. This percentage is being reduced from 20% to 10%. (yet to be notified) |
| What does this mean for me? Firstly, this is likely to severely hit your cash flows. Even though you may have done the necessary compliance by paying for the invoice and recording it as a purchase. Unless the supplier uploads it, you will be devoid of credit. |
| Secondly, you can no longer ignore your GSTR-2A. Besides, you must reconcile GSTR-2A eligible credit with ITC as per books on a monthly basis, i.e. every time you are paying taxes and filing GSTR-3B. GSTR-2A, being an auto-populated return, has all sorts of invoices. It will have RCM invoices, ineligible ITC, eligible ITC etc. Every month, you must review your GSTR-2A, to remove what is ineligible, arrive at a number that is the eligible ITC. Compare this with the ITC as per your books of accounts and at best claim, 10% additional credit if the eligible ITC as per GSTR-2A is less than the ITC as per books of accounts. You can do all of this on TS Associates. |
| Anything else I should know You will also have to track separately the invoices of the previous month that have been uploaded in the current month. To make sure your ITC provisional credit for the previous month is as per rules too. |
| Also, it is important that you file your GSTR-1 timely since this will help your buyers claim credit smoothly. |
| Other updates from the GST Council meeting |
| Deadline for filing GSTR-9 and 9C for FY 2017-18 extended till 31st January 2020GSTR-1 late fee waived for GSTRs for periods July 2017 to November 2019, if all returns filed by 10th January 2020Further amendments to the GST law to be included in Budget 2020. |
ByShashi Mishra
Shashi Mishra is Founder of TS Associates and Certified Lead Auditor from (International Register of Certificated Auditors-IRCA). He has a Good Expertise Over Legal, Intellectual Property, Income TAX, GST and Corporate Compliances.