Clarification of Issues Relating to Application of Rule 36(4) of CGST Rules 2017

In view of measures taken to contain the spread of COVID-19 pandemic, vide notification No. 30/2020-CT, dated 03.04.2020, it had been prescribed by the department that the condition made under Rule 36(4) of  CGST Rules shall apply cumulatively for the tax period February, March, April, May, June, July and August, 2020 and that the return in FORM GSTR-3B for the tax period September, 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months.

The CBIC has issued a Circular No. 142/12/2020-GST dated 9th October, 2020 providing clarification relating to application of sub-rule (4) of rule 36 of the CGST Rules, 2017 for the months of February, 2020 to August, 2020. The main points of the circular are given below:

1. To reconcile the ITC availed in their FORM GSTR-3Bs for the period February, 2020 to August, 2020 with the details of invoices uploaded by their suppliers of the said months, till the due date of furnishing FORM GSTR-1 for the month of September, 2020.

2. The cumulative amount of ITC availed for the said months in FORM GSTR-3B should not exceed 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in GSTR 1, till the due date of furnishing GSTR-1 for the month of September, 2020 that is 11.10.2020. It may be noted that availability of 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in GSTR 1 does not mean that the total credit can exceed the tax amount as reflected in the total invoices for the supplies received by the taxpayer i.e. the maximum credit available in terms of provisions of section 16 of the CGST Act.

3. The excess ITC availed arising out of reconciliation during this period, if any, shall be required to be reversed in Table 4(B)(2) of FORM GSTR-3B, for the month of September, 2020.

4. Failure to reverse such excess availed ITC on account of cumulative application of sub-rule (4) of rule 36 of the CGST Rules would be treated as availment of ineligible ITC during the month of September, 2020. 

5. An illustration explaining the manner of cumulative reconciliation of ITC for the period February, 2020 to August, 2020 are given below in tabulated form.

 

Tax Period	ITC availed by the taxpayer (recipient) in GSTR-3B of the respective months	Eligible ITC as per the provisions of Chapter V of the CGST Act.	Invoices on which ITC is eligible and uploaded by the suppliers till due date of FORM GSTR-1 for the tax period of September, 2020	Effect of cumulative application of rule 36(4) on availability of ITC.
February 2020	300	300	370	Maximum eligible ITC in terms of rule 36 (4) is 2450 + [10% of 2450] =2695. Taxpayer had availed ITC of 2750. Therefore, ITC of 55 [2750-2695] would be required to be reversed as mentioned in point 4 above.
March 2020	400	400	380
April 2020	500	500	450
May 2020	350	350	320
June 2020	450	450	400
July 2020	550	550	480
August 2020	200	200	150
Total	2750	2750	2450
ITC Reversal required to the extent of 55
September 2020	385	500	350	10% Rule shall apply independently for September, 2020
In the FORM GSTR-3B for the month of September, 2020, the tax payer shall avail ITC of 385 under Table 4(A) and would reverse ITC of 55 under Table 4(B)(2).