DISALLOWANCE OF ITC

[NAMAN DOKANIA]

Sir/Madam,

Can department disallow ITC availed in GSTR-3B and appearing in GSTR-2A, but not available in books of account? Becuase section 16, doesnot lays any condition for availment of ITC, if the same is availble or not available in books of account(s).

Please enlighten us.

[Amit Agrawal]

For my views, I am presuming that concerned inward-supply is not at all recorded in books of accounts of the tax-paper. And it is not merely a case where concerned ITC is mistakenly expensed out (along-with basis value of inward-supply) in the books of accounts.

As per Section 16 (1), registered person can take credit of input tax chargedon any supply of goods or services or both to himwhich are used or intended to be used in the course or furtherance of his business.

If books of accounts of the business does not show these as 'supply' as received by the registered person and GST there-on as charged to him, question of availing ITC there-against - merely because it is reflecting in GSTR-2A - does not arise.

And in such a situation, another requirement to take ITC as per Section 16 (1) about 'such inward-supply being used used or intended to be used in the course or furtherance of his business' would not even arise.

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

[Ganeshan Kalyani]

Sec. 16(2)(b) states as "he has received the goods or services or both". This is justified if the entry of goods in buyers premises is recorded in books of account. ITC should also be accounted as receivable in current asset to show that ITC is claimable in books as well. One cannot claim ITC merely because an ITC is populated in 2A.

[Shilpi Jain]

If its an expense missed to be accounted in the books but the goods and services have been received then credit should be eligible. However dispute could be whether it is used for the business since not accounted in the books?

What is the reason for not accounting? if missed can it be accounted in the next FY?

[Vijay kumar]

No.. but as per section 16(2), you need to reverse the ITC with interest if payment is not made to the supplier within 180 days.. If you have not accounted in the books, how payment is made? Thus, there is an indirect link between ITC and accounting, for obvious reasons.

AI Summary

Input tax credit eligibility depends on recorded receipt and business use; return entries alone are insufficient to secure credit. ITC entitlement depends on factual receipt and use for business and requires recording of the inward supply in the recipient's books; mere reflection in GSTR 2A/3B without accounting entries does not by itself support claimability, and omissions may require accounting correction or trigger reversal and interest consequences where payment conditions are unmet.