Central Board of Indirect Taxes and Customs (CBIC) has notified that the taxpayers can not avail 5% Provisional GST Input Tax Credit w.e.f. 1st January 2022. Businesses will now be able to avail the Input Tax Credit under GST available in their GSTR-2B.
This means that the businesses will need accurate GSTR-2B reconciliation against their Books of accounts.
In this short article, we have discussed the major changes introduced by the CBIC in the provisional ITC claim process.
GST Input Tax Credit | What is the new Update?
CBIC has notified that Sections 108, 109 and 113 to 122 of the Finance Act of 2021 shall come into force from 1st January 2022.
According to the earlier provisions under Rule 36 sub-rule (4) of CGST Act of 2017, taxpayers could avail a provisional credit of 5% of eligible ITC reflected in their GSTR-2B.
Section 109 notified - Amendment to section 16
"The details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies (i.e. GSTR-1), and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.
According to the earlier provisions under Rule 36 sub-rule (4) of CGST Act of 2017, taxpayers could avail a provisional credit of 5% of eligible ITC reflected in their GSTR-2B.
Now, this shall NOT be applicable w.e.f 1st January 2022 & businesses can NOT avail 5% provisional ITC as per their ITC reflected in GSTR-2B
This simply means that now the businesses can only claim GST Input Tax Credit reflected in the GSTR-2B of the recipient.
NOTE:
Businesses should note that the GST returns of December that will be filed in January 2022 will follow this rule & you will not be allowed to avail provisional ITC.
Hence, the businesses must notify their GST defaulting supplier to avail maximum Input Tax Credit for the month of December 2021.
Hence, GSTR-2B will now be an authoritative source to determine your eligible Input Tax Credit under GST.
How can I claim 100% Input Tax Credit after this change?
Input Tax Credit in GST is the most lucrative feature of the GST structure that makes GST a fair and improved taxation system.
Businesses need to follow specific mechanisms to claim maximum eligible ITC and stay away from ineligible ITC claims.
Following are some of the points that the businesses should keep in mind to claim maximum eligible ITC every month:
1. Notify your defaulting suppliers
2. Accurate reconciliation of GSTR-2B against purchase records
Hence, it is advised that the business use an automated ITC reconciliation tool like GSTHero to easily claim the maximum eligible ITC and identify your defaulting suppliers in a few minutes.
Highlighting features of GSTHero’s Reconciliation Solution
To summarize
Manual reconciliation is a long process and is highly prone to errors.
Now, as provisional ITC is scrapped, it's essential that businesses focus more on their GSTR-2B.
Hence, a detailed GSTR-2B reconciliation will help businesses claim only the eligible & maximum Input Tax Credit under GST.
Stay updated; stay ahead!
Until the next time….
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