India’s Central Board of Indirect Tax and Customs (CBIC) has clarified that a new rule limiting input tax credit (ITC) claims to 20 per cent of the eligible amount where invoice matching has not been done and uploaded by the suppliers would not be applicable to the integrated goods and services tax (IGST) paid on imports and GST paid under the reverse charge mechanism.
Announced by CBIC on October 9, the new rule limited the scope of ITC in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers to 20 per cent of the eligible amount.India's Central Board of Indirect Tax and Customs has clarified that a new rule limiting input tax credit claims to 20 per cent of the eligible amount where invoice matching has not been done and uploaded by the suppliers would not be applicable to the integrated goods and services tax (IGST) paid on imports and GST paid under the reverse charge mechanism.#
The notification resulted in severe confusion over the method of calculating this 20 per cent amount, the cut-off date and also whether it was to be calculated supplier-wise or on a consolidated basis, according to Indian media reports.
The clarification implies the 20 per cent rule will not be applied supplier-wise but suppliers can use it on a consolidated basis. But while applying the new rule, the ITC should not be over and above the original claim presented by the suppliers to the tax department through online submissions in respective forms.
CBIC has also clarified that if under the 20 per cent rule, balance ITC claims of suppliers remain, these can be claimed in any of the succeeding months provided details of requisite invoices are uploaded. The taxpayer can claim proportionate ITC as and when details of some invoices are uploaded by the suppliers.
To prevent use of fake GST invoices for availing input tax, the government had last month made it compulsory to match the invoices uploaded by the suppliers in their GSTR1 forms before buyers can avail ITC in their GSTR-3 returns.
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