GST Input Tax Credit Update
Gaurav Yadav

Updated on February 2nd, 2024

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

  • Section 16(1) states that every registered taxpayer can avail ITC under GST subject on satisfying certain conditions.
  • Section 16(2) states the conditions that should be satisfied to avail eligible GST Input Tax Credit.
  • Section 16(2) (a) states that the taxpayer availing Input Tax Credit should be in possession of the invoices or debit note for which ITC is being availed.
  • After section (2) (a), (aa) clause has been added.
  • Section 16(2) (aa) states that 

"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.

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

Notify defaulting suppliers
  • It’s evident that the available ITC in GSTR-2B is completely dependent upon your suppliers' regular & timely GSTR1 filing .
  • When your supplier files timely GSTR-1, it will get reflected in your GSTR-2B, and you can easily avail Input Tax Credit for the given month.
  • However, if your supplier defaults on filing his monthly GSTR-1, then the ITC will not be reflected in your GSTR-2B, and you will not be able to claim Input Tax Credit on the transaction with the defaulting supplier.
  • Hence, it has become essential than ever to constantly follow up with your defaulting supplier and ask him to file his GSTR-1 well before the due date.
  • GSTHero's innovative return filing solution automatically sends a notification to your defaulting supplier so that he can take corrective actions, and you'll be able to claim maximum Input Tax Credit under GST.

2. Accurate reconciliation of GSTR-2B against purchase records

reconciliation of GSTR-2B
  • It’s true that businesses should identify their defaulting suppliers, and it’s an essential thing. But what are the ways to spot defaulting suppliers?
  • GSTR-2A & GSTR-2B reconciliation against the purchase records is the only way to spot your defaulting supplier.
  • For a large business with multiple GST registered suppliers, it is challenging to reconcile your purchase records against the static GSTR-2B manually.

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

  • GSTHero is a Government-appointed GST Suvidha Provider (GSP). Hence all our solutions are 100% compliant with the dynamic GST laws.
  • Eliminates all the possible errors with accurate reconciliation of GSTR-2A & GSTR-2B against purchase records of the business.
  • Identifies & notifies the defaulting suppliers automatically.
  • Get comprehensive reconciliation reports to accurately identify & claim your eligible Input Tax Credit under GST.

To schedule a free demo of our Reconciliation solution-

Call: +91 8007700800

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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  • Identify defaulting suppliers 
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Gaurav Yadav

About the author

Gaurav is an Engineer by training with a deep interest in Economics & Finance. He has been associated with the Fin-Tech industry for quite some time now. He writes for GSTHero for topics including GST Compliance, GST Structure, etc & aims to break down complicated technical jargon into simple terms for the taxpayers.

His expertise includes GST Laws, Corporate Finance & Macro-Economics.

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