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GST - Denying Refund of ITC not reflected in GSTR-2A- is it valid?

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GST - Denying Refund of ITC not reflected in GSTR-2A- is it valid?
By: CAVenkataprasad Pasupuleti
May 14, 2020
All Articles by: CAVenkataprasad Pasupuleti       View Profile
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The spread of Corona Virus (COVID-19) has caused immense loss to the lives of people and impacted the trade and industry very badly in an unprecedented manner. The Government has announced various relief measures relating to statutory and regulatory compliance matters across sectors. Under GST, the Government[1] inter alia

  • Expediting the processing of refunds to the Exporters
  • Deferment of Rule 36(4) for the period February 2020 to August 2020 and cumulative adjustment in September 2020[2]
  • Waiving/concessions in the interest on delayed GST remittance
  • Postponing the various statutory compliances[3]

The above measures are appreciable and welcoming

However, CBIC has issued circular No. 135/05/2020-GST dated 31.03.2020 clarifying the certain issues relating to the refund under GST. One among them is the denying ITC refund of invoices not reflected in GSTR-2A. The relevant portion of the circular reads as under (Para 5)

5. Guidelines for refunds of Input Tax Credit under Section 54(3)

5.1 In terms of para 36 of circular No. 125/44/2019-GST dated 18.11.2019, the refund of ITC availed in respect of invoices not reflected in FORM GSTR-2A was also admissible and copies of such invoices were required to be uploaded. However, in wake of insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, various references have been received from the field formations regarding admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant.

5.2 The matter has been examined and it has been decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, para 36 of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent.”

Thus, circular no. 135 clarified that refund would be restricted to the extent of ITC on the invoices reflected in GSTR-2A. In this article, an attempt made is made to analyze the legal validity of the clarification.

As seen from the circular, the circular was issued in wake of Rule 36(4) of CGST Rules, 2017 as amended. Rule 36(4) prescribed that ITC shall be entitled to the extent of the invoices uploaded by the suppliers and gives another 10%[4] of the matched ITC in addition to the matched ITC.

The above referred clarification of circular No. 135, ibid to restrict the refund of ITC to the extent of invoices reflected in GSTR-2A is not valid inter alia

  • Firstly, Rule 36(4), ibid itself suffers from the legal infirmity and author is of strong view that it would get struck down by the courts in future. Consequently, the clarification based on such ill-founded Rule would also get the same treatment.
  • Even assuming Rule 36(4), ibid is valid, it does not require the invoice level matching to avail ITC, and it requires the matching only at the consolidated level. The same was clarified by the Circular No. 123/42/2019– GST dated 11.11.2019 (a relevant portion is given below)


Whether the said restriction is to be calculated supplier wise or on consolidated basis?

The restriction imposed is not supplier wise. The credit available under sub-rule (4) of rule 36 is linked to total eligible credit from all suppliers against all supplies whose details have been uploaded by the suppliers. Further, the calculation would be based on only those invoices which are otherwise eligible for ITC. Accordingly, those invoices on which ITC is not available under any of the provision (say under sub-section (5) of section 17) would not be considered for calculating 20 per cent. of the eligible credit available.


  • Further, Rule 36(4) gives 20/10% extra ITC in addition to the amount of ITC on the invoices reflected in GSTR-2A which was ignored by the circular no. 135, ibid thereby the denying the refund of ITC even though it was eligible u/r. 36(4), ibid.

Hence, restricting the refund to the extent of invoices reflected in GSTR-2A runs contrary to the Rule position and previous circulars. In this connection, it is worth noting that


In view of the above, the clarification issued through the Para 5 of Circular No. 135 is not correct. If any person is deprived of the refund because of this circular must challenge in the HC and seek to quash. Further, the circular was issued in the context of the amendment made in October 2019 thereby the ITC availed before that shall be granted without insisting for the invoice reflection in GSTR-2A. however, in practice, the department is applying the clarification for the sanction of the refunds for the before October 2019 which is again not in line with the law.  

Denial of the refund (to the extent of unmatched ITC) is causing the hardship to the exporters who are already badly hit by the COVID-19 crisis. Hence, it is suggested to the CBIC to withdraw the Para 5 of the circular or at least modify to allow the refund of ITC when invoices are available without insisting for matching.

(For any feedback /queries mail to

CA Venkat Prasad. P


By: CAVenkataprasad Pasupuleti - May 14, 2020


Discussions to this article



Possession of a tax invoice in respect of any supply of goods or services is one of the condition specified in S.16(2), GST Act, 2017, for availment of ITC and compliance of stipulated conditions is a must for availment of ITC as per Supreme Court decisions in the cases of Jayam and Company v. Assistant Commissioner (2016) 26 J.K.Jain’s Vat Reporter 147 (SC) (para 12, 35) = 2016 (9) TMI 408 - SUPREME COURT, State of Karnataka v. M.K. Agro Tech. (P) Ltd. (2017) 28 J.K.Jain’s Vat Reporter 162 (SC) = 2017 (9) TMI 1308 - SUPREME COURT, ALD Automotive Pvt. Ltd. v. The Commercial Tax Officer (2018) 28 J.K.Jain’s GST & VR 379 (SC) = 2018 (10) TMI 814 - SUPREME COURT. In view of this restriction of ITC under GST based on Tax Invoices entered in GSTR 2A prescribed by Circular No. 135 is correct.

CA Om Prakash Jain, Jaipur. Tel.9414300730:

By: OmPrakash jain
Dated: 14/05/2020

For the department 2A is the best method to cross check and curb fake invoice. It cannot be forgotten that the department gives time to reconcile the invoices and those not uploaded should be uploaded. The department has a statutory right to cross check.

Dated: 15/05/2020


Similarly another onerous condition for availment of ITC is in regard to payment of tax charged in respect of supply in Govt account under S.16(2)(c), leading to mismatching of ITC. On this issue two writ petitions are pending High Courts as under;

(2019) 32J.K.Jain’s GST & VR 38 Bharti Telemedia Ltd v. Union of India & Ors.(Delhi)

(2020) 33 J.K.Jain’s GST & VR 43 LGW Industries Limited & Ors. v. Union of India & Ors. (Cal)

CA Om Prakash Jain, Jaipur, 9414300730; e-mail:

By: OmPrakash jain
Dated: 15/05/2020

The ITC shall be extended as long as the tax invoice is available with the recipient. Mere non-reflection in GSTR-2A is insufficient to deny the ITC and more so when the matching provisions u/s. 42, 43 & 43A of CGST Act, 2017 are not yet implemented.

By: CAVenkataprasad Pasupuleti
Dated: 16/05/2020


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