This circular provides clarification on the manner of applying sub-rule (4) of Rule 36 of the CGST Rules, 2017 for availing input tax credit (ITC) on a cumulative basis for the tax periods from February 2020 to August 2020, in view of the disruptions caused by the COVID-19 pandemic.

It clarifies that, as notified earlier, the restriction under Rule 36(4) requiring ITC to be limited to 110% of eligible credit reflected in supplier-uploaded invoices was to be applied cumulatively for the said months, instead of on a monthly basis. Taxpayers are required to reconcile the total ITC availed in FORM GSTR-3B for February to August 2020 with the invoices uploaded by suppliers up to the due date of furnishing FORM GSTR-1 for September 2020, as reflected in FORM GSTR-2A.

The circular explains that the cumulative ITC availed for these months should not exceed 110% of the cumulative eligible ITC available on the basis of invoices uploaded by suppliers. Any excess ITC identified on such reconciliation is required to be reversed in Table 4(B)(2) of FORM GSTR-3B for September 2020. Failure to do so would be treated as availment of ineligible ITC. An illustrative table has been provided to explain the method of cumulative reconciliation.