Input reversal of 2017-18

[Nisha Prabhu]

Hi, if the registered entity does not have any output liability, has availed input during the year 2017-18. As there was no output, the same was not utilized. Now, it is identified that some of input is ineligible. Can the same be reversed in returns now? or need to pay along with interest in DRC showing in annual return GSTR-9/9C?

[KASTURI SETHI]

Yes. Inadmissible credit can be reversed/paid now by way of DRC-03 in cash for the purpose of Annual Returns. See Notification No.74/18-CT(R) dated 31.12.18 (Serial No.9 above Table No.17).

Since the registered person has not reduced output liability, so interest is not required to be paid. Not covered under Section 50 (3) of CGST Act. Also out of Section 50(1) & (2).

[Nisha Prabhu]

Can the reversal be adjusted from the electronic credit ledger while filing DRC-03 or payment needs to be done for the same?

[KASTURI SETHI]

For the purpose of GSTR-9, 9C, payment via Form DRC 03 is required to be paid in cash only. It has been metioned in Notification cited about.

[MUKUND THAKKAR]

As per departments view once credit is reflected in electronic credit ledger it is deem to be availed and utilization.

As per my view if you are not reducing your tax liability up to reversal of ITC by using the such credit need not pay Interest, only reflected in Electronic credit ledger means not to utilized.

[KASTURI SETHI]

Sh.Mukund Thakkar Ji,

Sir, Different view is always for the betterment. It should be welcomed. It opens closed mind. Dissent can thaw(melt) frozen thinking in countless ways. (It is a quote).

Section 50(3) of CGST Act talks of Section 42 (10) & Section 43 (10).

 "A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42or undue or excess reduction in output tax liability under sub-section (10) of Section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council."

"Section 42(10) The amount reduced from the output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the recipient in his return for the month in which such contravention takes place and such recipient shall be liable to pay interest on the amount so added at the rate specified insub-section (3) of section 50."

"Section 43 (10) The amount reduced from output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the supplier in his return for the month in which such contravention takes place and such supplier shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50."

If we peruse all above in tandem, it makes clear that interest is chargeable only if credit is used. The department cannot go beyond the scope of GST law.

There are case laws to this effect.

[Ganeshan Kalyani]

Since the credit was not at all utilized the payment of interest will not arise as stated by my experts colleague.

[Ramesh Kothari]

I think it can be reversal thru PMT-9

AI Summary

Reversal of ineligible input tax credit can be paid via DRC-03 in cash; interest not payable if credit unused. Inadmissible input tax credit for 2017-18 may be reversed now by payment via Form DRC-03 in cash for adjustment in GSTR-9/9C per Notification No.74/18-CT(R); electronic credit ledger payment is not acceptable for this purpose. Interest under provisions addressing undue or excess credit is generally chargeable only where the credit has been utilized; if the credit was never used to discharge output tax, interest is not payable, although a departmental view treats ledger-reflected credit as deemed availed. An alternative reversal route suggested was PMT-9.