While filling GST annual return for FY 2019-20 assesse shown PPF interest, FDR interest of Rs 3,00,000 as exempt income in Table 5D of GSTR-9. Assesse shown taxable Income of Rs 3 crore in GSTR-9 in table 4. Now the GST department issued DRC-01A notice for reversal of proportionate ITC Rs 32,400/- (i.e. 1% of total ITC Rs 32,40,000/-) as per section 17(2) read with rule 42
Q1 : Whether we have to pay the proportionate ITC or any remedy available to us. Please provide reference of Section, Rule, Case law.
Q2: Normally we do not report the PPF interest and bank interest income in GSTR-1. Is it compulsory to show bank interest in GSTR-9.
Thanks in advance
No ITC Reversal Needed for Interest Income Under Section 17(2), Rule 42 & 43, Unless You're a Financial Institution. An individual inquired about the requirement to reverse proportionate Input Tax Credit (ITC) under GST regulations after showing exempt income, such as PPF and FDR interest, in their annual return. The GST department issued a notice for ITC reversal. Respondents clarified that under Section 17(2) and Rule 42 & 43 of the CGST Rules, no reversal is needed for interest income unless the taxpayer is a financial institution. They advised reviewing specific rule explanations and confirmed that reporting such income in GSTR-9 is necessary. Further details were requested for a more precise response. (AI Summary)
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