Reversal Of ITC

[Tejas Kumar]

One of our client has claimed ITC on Purchases even though he is not required to claim as all sales are exempted sales. And till date he has not reversed ITC on same. So How to show this impact in GSTR-9. Do i need to reverse in Current month or should it be paid in DRC-03.

[Shilpi Jain]

Get it reversed by utilising available credit in DRC-03 before filing GSTR-9 by selecting option 'Other'. If not utilised no interest implication should arise.

[KASTURI SETHI]

See Notification No.74/18-CT dated 31.12.18 (Serial 9 above Table No.17). It is mandatory to be paid in cash through DRC-03.

[YAGAY andSUN]

If the amount is unutilized then interest would not be payable.

[Ganeshan Kalyani]

The government should come up with further clarifty on the GST return form. The querist has not utilized the credit. He has only availed. As such there is balance in his electronic credit ledger. The Input tax credit is nothing but the tax already paid by him to his supplier of goods or services. Now, as per provision he has to pay vide Form DRC 03 will be additional payment.

[Shilpi Jain]

Yes the notification says so but there is no such restriction in law in this regard. Further the said instruction says when paid as part of reco or GSTR 9.. but if the same is reversed as part of GSTR 3B or for other reasons in DRC 03 then it could be said that the instruction is not available.

Further there are case laws under earlier law which state that reversal of itc is as good as itc never availed

Considering this it can be paid through itc balance

[Pavan Mahulkar]

As per Section 73(5) or 74(5)

5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

Before Issuance of Notice in Form DRC-01 under section 73(1) of CGST ACT can self ascertain the tax liability and pay the same vide DRC-03.

While paying the same the dealer may utilize the Credit ledger or cash ledger..

It is mandatory to utilize the cash ledger only to pay the liability as ascertained at the time of Annual Return..

[Ganeshan Kalyani]

I have attended a seminar recently where the speaker was of the opinion that if one can correlate the input tax credit available now in electronic credit ledger is the credit pertaining to the period before which the liability have raised then input tax credit can be reversed through credit. In this case, I guess it is possible as the querist has no liability.

[Ganeshan Kalyani]

Generally, the taxpayer has liability and input tax credit all the time the supplies are taking place. In such cases, the proving becomes difficult and hence it is the best way to reverse credit is by resorting to pay through DRC-03.

[Himansu Sekhar]

Should be through DRC03

AI Summary

Reversal of Input Tax Credit: payment via DRC-03 is required though use of credit ledger is disputed. Where a taxpayer has availed Input Tax Credit but only makes exempt supplies, practitioners recommend reversal by payment through Form DRC-03, with a notification-based view requiring cash payment for annual-return-determined liabilities. Alternative practice allows reversal by debiting the electronic credit ledger or reversing in periodic returns; interest may not arise if credit remains unutilised. The discussion notes statutory self-assessment routes to discharge tax via DRC-03 and records administrative inconsistency requiring further clarification.