DRC 01 for Ineligible Credit

[RAGHAV SHARMA]

Hello Experts,

ITC on Motor vehicle is not claimed in GSTR-3B. Department issued DRC-01 on the basis that ineligible credit is not shown in GSTR-3B nor in GSTR-9. Is it valid to issue DRC-01 even for the ITC which is never claimed?

Kindly provide guidance on above matter

Thanks and Regards

Raghav

[KASTURI SETHI]

Sh.Raghav Sharma Ji,

You have not claimed ITC in question but sometimes it happens that ineligible ITC is automatically reflected in GSTR 3B on the basis of GSTR-1 filed by the supplier. It is also used automatically, if not deleted from GSTR-3B. Pl. check your all GSTR 3B returns already filed.

You are to examine every month and delete inadmissible ITC. It is your duty to check and delete ineligible ITC otherwise you will receive such notices.

[RAGHAV SHARMA]

Thanks Shri Kasturi Ji,

I would like to add on some more details. For the Year let’s say total ITC is 100 as per GSTR-2A. We have claimed 80 as ITC and didn’t claim the 20 because 20 is the ITC for motor vehicle. ITC is not claimed for Motor vehicle in any of GSTR-3B. My query is if we claim ITC on Net basis in GSTR-3B( in this case we claimed 80), Can department issue notice for demand of 20 on this ground that you have not shown ITC as ineligible in the returns?

Thanks

[Sadanand Bulbule]

Dear querist

Your apprehension is right. The department is conducting inquiry in such cases to get the doubts cleared. On convincing , they have accepted the reality and dropped the proposals.

[KASTURI SETHI]

Sh.Raghav Sharma Ji,

As advised by Sh.Sadanand Bulbule Sir, you should be able to convince the concerned Proper Officer with documentary evidence (books of accounts) to the effect that you have not availed and used ineligible ITC for Motor Vehicles and get the same decided in your favour. You are to prove that you have not caused revenue loss to Govt.

You have said that you have availed only 80 % ITC and NOT 20% meant for Motor Vehicle ineligible IITC. Before meeting the Proper Officer, you must do your 'home work'. with full preparation and not half baked preparation and get well acquainted with the whole situation. If you are on right track, there is nothing to worry.

Pl. do the following exercise :-

(i) Whether the entry of ineligible ITC for Motor Vehicles was auto-populated ? (ii) If the answer is 'yes', was that entry deleted before filing GSTR 3B ?

 

 

 

[KASTURI SETHI]

In continuation of my above reply, pl.read 'reverse' in place of 'delete'.

You are to reverse ineligible ITC under Table 4 against Serial No.B(2) -Others of GSTR 3B, if such entry has been auto populated.

One of my clients is supplying restaurant services and he is not eligible for ITC. ITC is auto populated every month. . I reverse ineligible ITC under Table 4 against 'serial no.(B) (2) --Others' of GSTR 3B every month before filing GSTR 3B.

[Amit Agrawal]

It is seriously twisted logic of concerned Dept's officer to issue SCN u/s 73 / 74 in your situation where there is no wrong availment of any ITC by you.

How can one raise any demand u/s 73 / 74 upon the tax-payer just because ITC as per Form GSTR-2A was greater than ITC actually availed by the tax-payer (and differential amount was towards ineligible ITC).

To my mind, this is pure harassment of the tax-payer .... nothing else. I guess some officers lacks elementary understanding of GST law, despite more than 6 years are passed.

Having said that, the tax-payer got no option but to suffer and defend himself against such SCN by proving the facts & law (i.e. unless and until, he is willing to challenge such perverse SCN itself by filing a writ petition before jurisdictional HC, which can be costly / daunting affair for majority tax-payers)

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

[Shilpi Jain]

Ideally not to be issued. It is only a disclosure error.

However, reason for the issue being that the State has lost revenue in this regard that it was eligible.

Ideally CBIC to come up with a mechanism to identify these kind of credits and given due revenue to the respective States.

THough now the new scheme of disclosure in the returns should take care of this.

[Padmanathan KV]

I had a similar issue which was nothing short of harassment. First my case was picked by the intelligence wing, then during ASMT-10 proceedings and finally Dept AG audit.

In all the proceedings, I had given the total ITC available in GSTR-2A during that respective month and list of ITC availed by me in GSTR-3B, and also the fixed asset register where GST was capitalized along with motor car on which depreciation was claimed.

The officers were convinced and no notice was issued in any proceedings.

[PRABHU RAMANATHAN]

Hi Raghav,

In my opinion, if you have not claimed that ITC even though reflected in the GSTR 2B, you must provide the bill-wise detailed break up of all ITC availed related to that period along with your books of accounts to establish the fact that ITC was never availed related to that vehicle and was capitalized while finalizing the balance sheet and not claimed in books as well as GST return.

Mere not declaring in the necessary column of GSTR 3B or GSTR 9 does not misconstrue as you have claimed the ITC, provided you have properly treated the accounting entries in your books of accounts by capitalizing the ITC to the respective fixed asset.

AI Summary

Taxpayers Urged to Verify GSTR-3B Entries Amid DRC-01 Notices for Ineligible ITC Under GST; Provide Evidence to Authorities A discussion on a forum addresses a query about the issuance of DRC-01 notices for ineligible Input Tax Credit (ITC) under GST. The original poster, who did not claim ITC for motor vehicles, received a notice despite not showing it as ineligible in GSTR-3B or GSTR-9. Respondents advise checking GSTR-3B for auto-populated entries and ensuring ineligible ITC is reversed, not deleted. They suggest providing documentary evidence to the tax authorities to prove no revenue loss occurred. Some respondents criticize the department's actions as harassment due to a lack of understanding of GST laws.