Home > GST Home > GST Help Center > New 20% ITC RuleLast Updated: Jan 15th 2020

What is New 20% ITC Rule & How it affects your GST Credit

The CBIC has notified the new Input Tax Credit (ITC) rules w.e.f 09th October 2019. The new ITC rules restrict GST Credit (ITC) in relation to invoices, and debit notes received from the suppliers that are not reflecting in GSTR 2A

New 20% ITC Rule & Impact on GST Credit
1.What is the new 20% ITC Rule & Explain?

Earlier, the business can take the entire Input tax credit on the self-assessment basis even if the invoices are not uploaded by the supplier. But with effective, 09th Oct 2019, the business can claim only 20% of eligible GST credit if the suppliers have not uploaded their B2B invoices through GSTR 1.

Example: Mr Ram has purchased good from Krishna, Arjun and Bharath. The Total Input Tax Credit available on different purchases is as follows

Krishna – 30,000; Arjun – 15,000; Bharath- 45,000. Among these three, Bharath has not filed his GSTR 1.

Earlier Scenario: Mr Ram can claim the entire input tax credit of Rs 90,000 even if his suppliers has not uploaded invoices in GSTR 1

Present Scenario: Mr Ram can claim the full credit of Rs 45,000 from Krishna and Arjun. The credit of Rs 45,000 from Bharath cannot be claimed fully. Ram can claim only 20% of Rs 45,000 i.e., Rs 9,000 while filing his return. The rest 80% can be claimed in the month when it is reflecting in GSTR 2A.

2.What is the Impact of new ITC rule ?
  1. Proper Reconciliation of GSTR 2A should be done to claim the Input Tax Credit correctly
  2. If you do not upload B2B invoices on the GST portal, then the Business Customers will not be able to claim 100% of eligible GST credit (ITC). Instead, it will be restricted to only 20% of the eligible credit.
  3. The business may face a problem with the suppliers who are filing GSTR 1 on quarterly basis as the input tax credit is deferred to next quarter
  4. The business may get more escalations from customers, and GST Authorities for not filing GSTR 1 at regular intervals.
  5. Bulk Sales opportunities or business customers can get lost if they don’t get their eligible Input Tax Credit on time.
  6. B2B Sellers on eCommerce operators like Amazon, Flipkart, Indiamart may have major impact in getting their ITC, if not filing their GSTR-1
2.What are the Next Steps you should do ?
  1. In case you need guidance and/or GST Filing Services or EZTax.in GST Books Software, do not hesitate to call @ +91 7288 900 900 or Visit us @ EZTax.in GST Portal and chat with us.
  2. Make sure your suppliers are filing GSTR-1 B2B Invoices promptly, correctly by mentioning the invoice number and GSTIN of the business.
  3. In case you have missed GSTR-1 filing in the past OR filed B2B Invoices under B2C section, please revise the GSTR-1 filing using EZTax.in Books Software
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