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

Reversal of excess input tax credit: corrections may be effected through a subsequent periodic return; DRC-03 is procedural preference.
Reversal of excess ITC may be reported in a subsequent periodic return within the rectification window under section 39(9). Circular No. 26 permits net reporting of past-month adjustments in the current FORM GSTR-3B with no negative entries, requiring leftover amounts to be adjusted in later returns or claimed as refund. Departmental insistence on using DRC-03 reflects procedural convenience for transaction-specific recording, but corrections in GSTR-3B are supported by the rectification provision and the circular and would ordinarily be a procedural lapse if insisted otherwise.