Utilisation of ITC

[Rajesh Kumar]

Respected sir / madam

If a TP availed ineligible ITC in 2020-21 and then complete ITC had been utilised.

Now, the said TP wants to reverse the said availed ineligible ITC. So, please guide whether he reverse the said ITC through ITC availed in 2022-23.

Is it wrong to reverse the ITC availed earlier with ITC availed later ? Please guide with provisions.

[V Rajalakshmi]

According to Sec 49 (4) and Rule 86(2) of CGST, the taxable person can use the balance in the electronic credit ledger towards payment of tax liability arising on account of the reversal of ineligible ITC. Please use DRC 03 to set off the credit instead of directly reversing it in GSTR 3B. Reversals of this kind will also attract interest, which needs to be paid in cash.

[Shilpi Jain]

There is no restriction in using ITC to pay off the earlier wrongly availed and utilized ITC. Interest will have to be paid from the date of utilisation of credit

AI Summary

Input tax credit rectification allowed by set-off from electronic credit ledger, but reversal attracts interest payable in cash. The taxpayer may discharge the tax liability arising from reversal of ineligible input tax credit by utilising the balance in the electronic credit ledger and must effect the set-off via DRC-03 rather than by direct adjustment in the periodic return; reversals attract interest which is payable in cash from the date of utilisation of the credit.