Section 17(2) Rule 42

[Komal Agarwal]

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

AI Summary

Reversal of Input Tax Credit not required for PPF and FDR interest for non-banking taxpayers under rules' explanation.
Section 17(2) concerns exempt supplies, and the CGST Rules' explanatory provision excludes, for certain taxpayers, services by way of accepting deposits or extending loans insofar as consideration is interest or discount from the aggregate value of exempt supplies used to determine ITC reversal; accordingly, for taxpayers other than banking or specified financial institutions, PPF and FDR interest reported as exempt in the annual return is generally not included for proportional ITC reversal.