Reversal of ineligible ITC

[Krishna Murthy]

An assessee claimed ineligible ITC (CGST and SGST). After knowing that the same is not eligible for ITC he has reversed the same in GSTR 3B. However, since he does not have enough credit in CGST and SGST, he has reversed the same using IGST balance available. Is this valid or he should have paid CGST and SGST through challan. Sec 49(5) allows IGST ITC to be used to pay CGST and SGST.

AI Summary

Debate on Reversing Ineligible ITC Using IGST Credit Under Section 49(5) of CGST Act: Permissible or Not? An individual raised a query about reversing ineligible Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework. The assessee initially claimed ineligible ITC for CGST and SGST, and upon realizing the error, reversed it using available IGST credit due to insufficient CGST and SGST balances. The discussion involved multiple participants debating the validity of this action. Some argued it is permissible under Section 49(5) of the CGST Act, which allows using IGST credit for CGST and SGST payments. Others contended that reversing ineligible ITC using IGST is not valid as it does not constitute payment towards output tax.