Treatment of Unutilised ITC at the Time of GST Registration Cancellation

[vaibhav agrawal]

At the time of cancellation of GST registration, after discharging the liability as required under Section 29(5) of the CGST Act, a balance of ITC still remain in the electronic credit ledger.

What will be the treatment of such unutilised ITC balance?

Will it lapse automatically upon cancellation, or is there any provision for its utilisation or refund?

Kindly clarify.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Kindly refer to Section 45r w r 81. The accumulated ITC will have to reversed in GSTR-10 the Final Return which is to be filed within 3 months from the date of cancellation. By the by, if it is of any interest you, there was a perverse ruling by a single judge of the Sikkim High Court in SICPA India Pvt Ltd - 2025 (6) TMI 834 - SIKKIM HIGH COURT which allowed refund of the accumulated ITC. This decision was later reversed by a multi judge bench.

[KASTURI SETHI]

GST laws do not allow refund inasmuch as Section 16(1) allows availment of ITC for utilization only in the course or furtherance of business. Since your registration stands cancelled in accordance with GST laws, you are unable to utilize the balance of ITC. Hence, in this scenario, the balance of unutilized ITC would lapse.

[KASTURI SETHI]

IN FAVOUR OF PARTY

2025 (6) TMI 834 - SIKKIM HIGH COURT SICPA India Pvt. Ltd. Versus Union of India

 

[KASTURI SETHI]

IN FAVOUR OF THE DEPARTMENT

2025 (9) TMI 537 - SIKKIM HIGH COURT BISWANATH SOMADDER, CJ. and Bhaskar Raj Pradhan, J. Union of India Versus SICPA India Pvt. Ltd.

 

 

[KASTURI SETHI]

Compare the language of both judgements before arriving at your decision.

[Shilpi Jain]

Refund will not be eligible and utilisation cannot happen as you have cancelled the registration

[Shilpi Jain]

Though can you inform what is the reason for the ITC balance?

[vaibhav agrawal]

Machinery was bought 4 years ago never put to use. As of today, machinery will be sold as scrap. So after discharging liability as per section 29(5) of CGST Act,2017, ITC balance will appear in ECL.

AI Summary

Unutilised input tax credit after GST registration cancellation cannot be utilised or refunded and may lapse. Treatment of unutilised ITC after GST registration cancellation concerns whether the balance remaining in the electronic credit ledger can be utilised or refunded. The discussion states that, after discharging the liability under section 29(5), further utilisation is not possible once registration is cancelled, refund is not available, and the unutilised credit is treated as lapsing. It also refers to reversal of accumulated ITC in GSTR-10, the final return filed after cancellation, and notes conflicting views in cited Sikkim High Court decisions.