TaxTMI 
TaxTMI 
Hi,
Is there a need to reverse Input Tax Credit on prepaid expenses? Are there any case laws in this regard.
Thank you in advance.
ITC on Prepaid expense
07 Dec 2024 
5 Replies 
3059 Views Asked by
Input Tax Credit on prepaid expenses: entitlement follows invoice/payment timing under GST, no mandatory reversal generally required.
Reversal of Input Tax Credit on prepaid expenses is generally unnecessary where the supply is deemed made only to the extent covered by the invoice or payment; ITC may be claimed on or after the service invoice date. The core issue is whether the portion of a prepaid annual payment attributable to the next financial year should be disallowed, which depends on applying the invoice/payment timing rule to the insurer's billing and the recipient's accounting treatment. (AI Summary)
Reversal of Input Tax Credit on prepaid expenses is generally unnecessary where the supply is deemed made only to the extent covered by the invoice or payment; ITC may be claimed on or after the service invoice date. The core issue is whether the portion of a prepaid annual payment attributable to the next financial year should be disallowed, which depends on applying the invoice/payment timing rule to the insurer's billing and the recipient's accounting treatment. (AI Summary)