HOW MUCH ITC CAN BE CLAIMED OR WHAT IS THE LIMIT OF CLAIMING ITC AS PER GSTR 2B & GSTR 2A

 This is to brought in notice to every taxpayers that any leniency and ignorance of rules of ITC under GST Act can lead the taxpayers to a serious accusation and cancellation of GSTIN.

Before there was no restrictions of claiming ITC as to what amount or proportion of ITC a taxpayer is claiming on the basis of the invoices they have. Before the taxpayers were allowed to claim ITC against all those invoices that are with them either visible in the GSTR 2A or in physical copy, which means that if any invoices that were not in GSTR 2A and the taxpayer claiming of having the hard copy of GST Invoice were allowed to claim ITC against that invoices(Not in GSTR 2A) also.

But, now things has been changed a lot and at present the taxpayers can claim ITC with limits.

Let us get explained in detail

Recently when GSTR 2B came into effect there was a clause that taxpayers can claim ITC equal to GSTR 2B or maximum of 120% of GSTR 2B.

Now this maximum of 120% has got reduced to 105% only. It means that now after the latest update as on 02.01.2021 by GST council, W.E.F 01.01.2021 taxpayers can only claim a maximum of 105% ITC in a month irrespective of Invoices he has for that month.

Now, here are some of the points that taxpayers should understand. After the introduction of GSTR 2B any taxpayer can claim ITC equal to that is visible in GSTR 2B or if the taxpayer has more ITC then the ITC visible in GSTR 2B then the taxpayer can claim a total of ITC 105% of GSTR 2B in his GSTR 3B. A taxpayer can claim only 5% extra ITC.

This can be explained with example:

Your ITC in your Books of accounts - 5000

ITC visible in GSTR 2B - 4000

Calculation of ITC that a taxpayer can claim in GSTR 3B - 

4000*105% = 4200 or 

4000*5% = 200

4000+200 = 4200

ITC in GSTR 3B = 4200

A taxpayer can claim maximum of 4200 and he will not be able to claim all 5000 at once.

If the ITC claimed by a taxpayer in his/her GSTR 3B is more than 105% of GSTR 2B then the taxpayers GST registration can be processed for cancellation as per Rule 21(e) of CGST rules 2017 or  a proper officer will issue a notice showing the mismatch ITC claimed and you will be asked to explain the reason behind claiming of ITC more than 105% and if the reason not find valid then the proper officer will be forced to cancel the registration.

This does not means that a taxpayer will have any loss of his/her ITC because the taxpayer can not claim all ITC in that particular month but when those ITC will get visible in next months GSTR 2B then the taxpayer can claim that ITC easily.

This amendment has only changed the time of claiming ITC and there is  no loss of ITC and the taxpayer has to only ensure that the dealer from whom he is dealing is filing his/her returns timely and if by mistake any invoice was missed in current months return then it will be shown in next months return.

Before taxpayer was able to claim all ITC at one point of time but now the taxpayers will be restricted and will claim ITC depending on the return filed by his dealer.

Conclusion to this will be that this is a very good step by GST council as every taxpayer in now bound to file their returns not only in time but also will ensure that they are filing their returns correctly.

Taxpayers are now dependent on each other for their benefits as if a taxpayer wants to claim full ITC in that month then he will force his dealer to file all the invoices correctly and in time so that he can claim his ITC in time.

The taxpayers will be bound and forced to file return correctly and on time to avoid loss of business with their dealers.

For more details of ITC and GSTR 2B visit - https://www.gst-return-filling.com/2020/11/what-is-gstr-2b.html