REVERSAL OF EXCESS ITC

[NAMAN DOKANIA]

in GSTR-3B for the month of April 2019, an ITC of Rs. 1000000/- was excessively taken in GSTR-3B, but the same was reversed in April 2020 in GSTR-3B. The reversal was not separately shown. Rather the same was netted off i.e. to say that total ITC for the month of April 2020 was 2500000/-, but we took net ITC of 1500000/- only.

The same was also shown and reflected in GSTR-9 for the FY 2019-20 & 2020-21.

Now during the audit, department is not allowing the reversal. How can we go about this?

[Shilpi Jain]

You will have to show them reconciliation of 2020 ITC to show that the excess ITC was adjusted subsequently.

Try to also get CA in this regard to mention that excess ITC was reversed in next year

[NAMAN DOKANIA]

The GSTR-9 shows the bifurcation of 2500000 total itc less ITC Reversed 1000000/-.

But in GSTR-3B we have not shown separately about the reversal.

[Amit Agrawal]

Para 4 of the Circular No. 26/26/2017-GST dated 29th December , 2017

[NAMAN DOKANIA]

Amit Sir

I got your circular but it doesnot relates to our case as it is a matter of reversal of itc not showing separately. Can u help on this.

[KASTURI SETHI]

You will get relief (right) only through litigation. SCN will be issued.

[Amit Agrawal]

Dear Querist,

W.r.t. your post No. 4, in my personal view, Para 4 of the Circular No. 26/26/2017-GST dated 29th December , 2017 actually allows 'ITC reversal' as done by you. All you need to read and re-read said Para to understand what I am saying.

While Para 3 and table annexed to the circular will not support your course of action, Para 4 starts with the words 'It is clarified that....'.

Once there was option given by Board to reverse excess ITC of earlier months by showing ITC of subsequent month/s on 'On net basis' (by issuing a circular in exercise of its powers conferred under section 168 (1) of the Central Goods and Services Tax Act, 2017), in my humble view, nothing stops you to using that option so given.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Better way is to call what you have done as 'correction / rectification in ITC' in subsequent months (instead of 'Reversal of ITC'), so as to also use Section 39 (9) as part of your defense read with above-said Para 4 of the circular.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Input Tax Credit reversal: netting in subsequent returns may be supported by reconciliation, CA certification and correction provisions. Excess Input Tax Credit originally claimed in April 2019 was offset in April 2020 by netting the subsequent month's GSTR-3B rather than showing a separate reversal line; the adjustment was disclosed in GSTR-9. Recommended measures are to prepare a reconciliation evidencing the correction, obtain CA certification of the reversal by netting, and rely on administrative guidance permitting on net adjustments while noting the possibility of departmental proceedings and framing the change as a return correction mechanism.