MANNER OF REVERSAL OF EXCESS ITC

[ROHIT GOEL]

Dear Sir,

One of the clients claimed ITC for month of January and Feb 2019 doubly i.e. 200 instead of 100 due to error by accountant. The ITC remained unutilised and mistake was realised in August 2019. On realisation, assessee reversed the excess of 100 by punching same in Table 4(B) of GSTR-3B for Aug 2019. Thereafter, same was also disclosed in GSTR-9 (Table-12) for FY 2018-19.

During departmental audit, same was explained to officer. However, concerned officer has rejected such reversal and again raised demand of ₹ 100. As per officer, reversal could not be made via GSTR-3B but can only be done by DRC-03. This is because when reversal was done via GSTR-3B of Aug, ITC for Aug was 20 and reversal was 100 and only 80 was added to output for Aug instead of full amount of 100. He is failing to understand that balance 20 got adjusted from eligible ITC for Aug 2019 and thus there was no loss to revenue.

I have gone through Instructions to GSTR-9 and same clearly allow reversal of ineligible ITC for FY 2018-19 in GSTR-3B of Aug 2019. However, I wanted your expert advice as to whether there is any other legal provision which allows/bars reversal of ITC of earlier FY in GSTR-3B of succeeding FY.

Hoping for a swift response.

AI Summary

Client Challenges Tax Officer's Rejection of ITC Reversal in GSTR-3B; Experts Argue DRC-03 Not Mandatory A client mistakenly claimed double the Input Tax Credit (ITC) for January and February 2019. The error was realized in August 2019, and the excess ITC was reversed in the GSTR-3B for August 2019 and disclosed in GSTR-9 for FY 2018-19. During an audit, the tax officer rejected the reversal, insisting it should have been done via DRC-03. The client seeks advice on the legality of reversing ITC in GSTR-3B. Experts suggest that while DRC-03 is often preferred, reversing in GSTR-3B is a procedural issue, and the department's demand for a second reversal is unjustified.